This research study focuses on The Effect
of the Banking Industry Post-Consolidation on the Overall Performance and
Growth on the Nigerian Economy.
A broad survey is taken on how effective
and beneficial the banking industry has improved after the December 2005
deadlines as stimulated by the monetary authority, Central Bank of Nigeria
In the study, an extensive literature review
has been embarked upon to ascertain the multiplier effect the consolidation of
banks has had on the various sectors of the economy – the insurance industry,
oil and gas sector, telecommunication industry, agriculture sector and other
sectors of the economy.
Thereafter, questionnaire were made use of
as a way of obtaining data from the general public and populace from different
aspects of the economy to ascertain their responses on how the banking
consolidation and reform have affected the economy’s performance. For the
purpose of analysis, simple percentage was used as the statistics tools to
answer the research questions and chi-square was used for testing the
The analysis of the data collected shows
the effects of the banking reforms and consolidation on the performance of the
The researcher not only reveals
information on how the reforms and consolidation has engendered economic growth
and development, but also highlights that the multiplier effects of the
consolidation can never be overemphasized and will be sustained over the
long-run economic development.
TABLE OF CONTENTS
Table of Contents v
of the Study 1
1.1 Pre-Consolidation Background of the Banking Industry 2
of the Problem and Analysis 3
of the Study 4
1.5 Hypothesis 5
1.6 Significance of
the Study 5
and Limitation of the Study 5
of Terms 6
2.0 Introduction 8
2.1 Gains of the Banking Consolidation and Recapitalization 9
of 25 Nigerian Banks 10
and Acquisition In Nigerian Banking Industry 13
of Banking Consolidation on the Various
of Post Consolidation in the Banking
3.1 Restatement of the Research Question and Hypothesis 37
of the Study Population 38
Deign and Procedure 39
3.4 Procedures for Processing and Analysing
of the Methodology 40
Statistics or Profile of Respondents 42
of Data Based on Part 2 of Questionnaire 48
Summary of Findings, Conclusions and
of Findings 57
5.1 Conclusion 58
5.2 Recommendation 60
1.0 BACKGROUND OF THE
The pre-merger consent for Access Bank Plc, Equity Bank Plc,
Gateway Bank Plc and global Bank Plc as one consolidated bank was granted in
April 2005, while the CBN’s approval in principle for the merger came in
The enlarged Access Bank Plc took off
on October 10 2005. On this day, the signages and other brand element of the
legacy bank collapsed into one single nomenclature – Access Bank Plc, in a
The bank achieved one of the highest
capital base in Nigeria N51.7 billion, a total asset base of N354 billion, a
total deposit of N220 billion and over 186-branch network across the country
after the merger exercise.
On October 17, the shares of the new
mega bank were listed on the stock exchange.
In April 2007, the governor of the
Central Bank of Nigeria, Professor Charles, Chukwuma Soludo at the
opening/launching ceremony of the Zenith Bank (UK) subsidiary, predicted that
by the end of 2006, about ten Nigerian banks would have a market capitalization
ranging between $2 billion and $5 billion each. The governor also noted that,
“the Nigerian banking system is the fastest growing in Africa and should by
2020 be the hub in Africa”. Soludo also said the CBN is ever committed and it
is playing a major role in the Nigerian financial system reform by stabilizing
the exchange rate and reducing inflation to single digit to enable business
grow and that the Nigerian banks would have the financial muscle and capital to
lead the way venturing into the open banking shops outside Nigeria, expanding
banking and financial operation into African regions and extending into the
United Kingdom and other parts of Europe as well as United States. These feat
was engendered through the 2005 banking consolidation exercise.
Today, Nigeria can boast of truly
universal banks and financial supermarkets. This is a core benefit the
consolidation in the industry, which has reduced the 89 banks (as at 2005) to
25 strong banks in the county, as at the 1st January 2006
commencement of the new banking era.
BACKGROUND OF THE BANKING INDUSTRY
On February 15 2007, Lucky Fiakpa, a
self styled financial/ economic consultant working with THISDAY business
journal noted that prior to the commencement of the consolidation programme,
the Nigerian banking industry had remarkable features of the market
concentration. The top ten out of the 89 banks the controlled more than 50
percent of the aggregate assets, more than 51 percent of the total liabilities
and more than 45 percent of the aggregate credit.
According to governor of the CBN,
small-sized, marginal players with very high overhead cost generally
characterized the industry. Most banks in the country had a capital base of
less than $10 million. Professor Charles Chkwuma Soludo (December 2006)
recalled that, “the Nigerian financial industry was dominated by the banking
system, small and fragile relative to the size and sophistication of the
economy, and relative to comparator countries”. He added that the Nigerian
financial system remained under developed before the regulatory-induced
consolidation exercise. “All the Nigerian 89 banks put together makes up the 4th
bank in South Africa in 2003, in terms of capital. The capital base of the
largest bank before reform was about US $526 million. Soludo further noted that
this condition also constrained them in terms of effective participation in
big-ticket transactions, many of them could not meet clients’ request for
funding, particularly in sectors like telecommunication, maritime as well as
oil and gas. Another obvious problem which the consolidation was to address
included heavy reliance on government patronage.
OF THE PROBLEM AND ANALYSIS
Today, the Nigerian financial system
can boast of buoyant and strong 25 banks with may having international presence
and operations outside the shores of Nigeria. This is as a result of the
consolidation exercise which has steered the development of the industry with
multiplier effect on the various aspects of the Nigerian economy. Thus,
needless to say that the consolidation of the banking industry has positively
affected favourably on all the aspects of the economy.
This study will take an expansion
review of how the banking industry consolidation has affected the other aspects
of the various sector of the economy, such as:
and gas industry
and advertisement industry
and real estate sector
market/ the Nigerian stock exchange
investing public as well as the general depositors
shareholders and core investors
Also an extensive review will be
taken at the external effect it has generated, vis-à-vis
of foreign direct investment (FDI)
rating and ranking
finance institutions’ vote of confidence
expansion and operational offices
bulk-money deals etc
OF THE STUDY
This study is designed to highlight
the benefits that has accrued to the overall economy as a result of the reforms
and consolidation of the banking industry. The strength and capabilities of the
post banking consolidation can never be over emphasized. This is because the
banking industry is the backbone of any economy.
The essence of this study is to
evaluate the effects of the strong banking industry after consolidation on the
overall economy as a key driver of economic development.
As clearly stated in the purpose of
the study, attempts will be made at giving analytical review in the effects of
the consolidation on the Nigerian economy.
This study will attempt to answer the
was the level of performance of banks before the consolidation?
Nigerian banks able to compete favourably with contemporary banks on the
international scene before consolidation?
many Nigerian banks had international standard ratings and rankings before
consolidation been favourably accepted in the banking industry?
consolidation improved the strength and performance of the Nigerian banks?
effect has consolidation of banking industry had on the Nigerian economy?
1. H0: The banking industry did
not need improvement before the pre-consolidation era.
H1: The banking industry
was in dire need of improvement before the pre-consolidation era
2. H0: The banking industry
consolidation has not positively affected the Nigerian economy.
H1: The banking industry
consolidation has positively affected the Nigerian economy
1.6 SIGNIFICANCE OF THE STUDY
This study is of great importance to
the reader as it takes an in-dept view in a most practical approach at
examining the repercussion effect of the consolidation of the banking industry
on the overall economy. It is hoped that readers will be enlightened and
educated on the consolidation and reforms of the banking industry.
AND LIMITATION OF THE STUDY
This research study focuses on the
performance of the banking industry during the pre-consolidation era and
post-consolidation as well of the effects on the performance of the Nigerian
However, the study is limited to the
approaches and desired results and effects of the consolidation on the
performance of the economy observed between January 2006 till date (September
are financial institutions in the economy that accepts deposit from the public
and capable of giving loans.
industry is a group or sector comprising of many small units or forms of
similar operations and activities.
Consolidation is the process of making an entity stronger by pooling resources
is the act of improving a system or an organization.
governor is a person who is the official head of an organisation, territory,
region or institution.
Lecture Series II on “Financial System Strategy 2020 – The Next Development
Threshold” by Professor Charles Soludo. 2006.
Banking Stocks” – Financial Standard Business Journal; January 2006.
Omoremi: “Special Reports in Nigeria’s 25 Consolidated Banks” Series I
Business Day Journal, THIS DAY; April 2007
Omoremi: “Special Reports on Nigeria’s 25 Consolidated Banks” Series II
Business Day Journal, THISDAY; May 2007.
Adelekan Adeyinka (Mrs.): “Lifting Banks Lid and
Big Banks Bucks are Coming” – Saturday Business Journal, THISDAY: MAY 5
2007; PAGES 38-41.