MERGER AND ACQUISITION IN BANK DISTRESS RESOLUTION IN NIGERIA (A CASE STUDY OF NIGERIA DEPOSIT INSURANCE CORPORATION)

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Product Category: Projects

Product Code: 00005260

No of Pages: 92

No of Chapters: 5

File Format: Microsoft Word

Price :

₦3000

 

TABLE OF CONTENTS

 

Title  page

Certification

Dedication

Acknowledgement

Table of content

 

CHAPTER ONE

1.1       Background of the study

1.2       Statement of the problem

1.3       Justification of the study

1.4       Objective of the study

1.5       Scope of the study

1.6       Relevance of the study

1.7       Definition of term

 

CHAPTER TWO

Literature review

2.1       The roles of bank in Nigerian economy

2.2       The nature of bank distress.

2.3       Modes of bank merger

2.4       Source of value in bank merger

2.5       Efficacy of  merger ad acquisition for bank distress

2.6       Justification for the establishment of deposit insurance scheme

2.7       Function of the  corporation

2.8       Benefits of deposit insurance in Nigeria

 

CHAPTER THREE

Research methodology

3.1       Types of data

3.2       Methods of data collection

3.3       Method of data analysis

3.4       Hypothesis testing

3.5       Statement of hypothesis

3.6       Historical background of NDIC

 

CHAPTER FOUR

THE ANALYSIS OF THE  OPERATIONAL ACTIVITIES OF THE NDIC

4.0       Introduction

4.1       Operational activities of the corporation

4.2       Other activities of the corporation

4.3       Assessment of the effectiveness of NDIC’S role is merger and acquisition in bank distress resolution

4.4       Hypothesis and data  testing

 

CHAPTER FIVE

5.1       Summary

5.2       Conclusion

5.3       Recommendation

Bibliography


CHAPTER ONE

INTRODUCTION

 

1.1   BACKGROUND TO THE STUDY

The advent of banking system in Nigeria dated back to 1892 when the Africa banking corporation opened its first branch in Lagos. as a result of initiative taken by Messer Elder Dempster and co: a shipping firm based in Liverpool the main motivation for opening the bank was to finance the shipping business of Elder Dempster and company that operated between Liverpool and west coast of Africa; this led to the format of the British  bank of west Africa in 1893 with N10,000 capital was  later increased to N100,000 capital, which was better increased during the same year. It was registered in London as a limited in 1894 and started operation in Lagos in the same year. Later, the responsibility of operating the West Africa currency board was entrusted to the bank. The bank as an agent of the board, received, stored and issued the west Africa silver coins in exchange for sterling coin or London  drafts.

Other branches were opened in major west Africa cities like Accra, Freetown, etc. British bank of West Africa opened it second Nigeria branch in old Calabar in 1970.

 

In 18999, another bank called Anglo-Africa bank was established in old calabar by the Royal Niger Company (now united Africa company UAC) to complete with British bank taken over of BBWA in 1921 due to the fierce competition and the monopoly of the  importation of sliver from the Royal mint enjoyed by BBWA. 

The British bank of West Africa changed its name to bank of West Africa in 1957, Africa Ghana gained her independence. In 1965, the bank of West Africa further assumed the name standard bank, having merged with the stand chartered bank of London. Later in 1979, the name of the bank was change to first bank   of Nigeria limited. After the government acquired sixty percent (60%) shares of the company. Sequel to the indigenization policy of the government.

In 1916, another, bank, the colonial bank was established in Nigeria. This bank was later taken over by the bareday’s bank DC & O (Dominion, colonial and overseas), which later changed its name to union bank.

Another foreign bank, the British and French bank for commerce and industry was established and later changed its name to British and French bank and later in 1961, the name was changed to united bank for Africa limited.

Due to the domination of foreign bank in Nigeria in 1929, the industrial and commercial bank was set up a handful of patriotic Nigerians. As a result, between the periods of 1933, about two hundred (200) banks were registered with a large percentage of them being indigenous banks. However, the indigenous bank that were established first folded up; this was as a result of an attempt to create fierce competition with expatriate banks.

Despite the fact that up to one hundred and eight-five (185) banks were established between 1947 and 1952 only four (4) banks survived. These banks includes, the national of Nigeria established in 1933, Abgonmagbe bank establishment in 1954 which were later known as Wema bank (a private indigenous bank establishment by Chief OKUPE). The Africa continental bank established in 1947 and founded by Chief Nnamdi Azikiwe and the British and French bank an expatriate bank now called united bank for Africa. As stated I the above paragraph, most of indigenous banks flailed due to bad management, lack of patronage, fraud, under capitalization, huge load debts etc. the high   rate of bank failure and the need to protect depositors of these banks led to the appointment of Mr. P. Paton to Enquirer into the conduct of banking business in Nigeria. As a result of the Paton report 1948, the enactment of the first banking ordinance which provided for minimum capital requirements was made; this led to the collapse of more indigenous banks. However, the period before this has been described as the free banking era. Inspite of the Paton repot and the enactment  of the banking ordinance of 1952, banks were still indulging in some mal-practices which the  act could not effectively control. Therefore, the necessity of establishing a central bank of supervise and control banks became more apparent and pressing. Thus, the central bank of Nigeria came into being in 1959, which led to the increase of banking supervisions CMD control and substantially curtail the mal-practice prevalent in the system. Subsequent amendment of the CBN act of 1959 lightened the grip of the central bank over the commercial banking institutions. Others legislation include; 1958 ordinance, the 1961, 1962 amendments and the 1969 banking Decree. As a  result, the capital requirement especially for foreign banks were doubled from N200,000 under the 1952 act to N400,000 and was again increased to N1.5 million  in 1969, from this period upwards though the policy objectives were to ensure sound banking practices and to protect customers, the control instrument became restrictive (Ebhodaghe 1993 and Adekanya 1986). Due to the imperfections in the system of credit allocations, the cost of credit and the intermediation process generally, the  federal government  introduced wide range of reforms in the banking system from 1986 as part of the general deregulation of the economy in the direction of market determine of pricing. The structural adjustment programme (SAP) was designed to alter the structure and operational mechanism of the financial system among other objectives. The reforms also made possible for the free study entry of more commercial and merchant bank into the system. As at 1992, a total of 121 bank (66 commercial and 55 merchant) were established the increased competition for deposit created room for new products to be introduced into the market as a result of the universal banking system. Recently, the 7 clearing banks in the country has made it mandatory for all existing banks in the entry country to reshape their financial position and from time to time examine their capital adequacy. These 7 banks are: Zenith bank Plc, United bank for Africa Plc, union Banks Plc, first bank Plc, Wema bank plc, Afribank Plc, and Standard Trust bank Plc. Thus any bank (s) found on the verge of distress.

 

1.2   STATEMENT OF THE PROBLEM

The call for merger modality to sustain the liability of the banking industrial is of paramount importance in Nigeria. These researches seek to answer the following questions;

i.            How cost effective is merger and acquisition option in lieu of other bank distress resolution option (deposit pay-off deposit transfer, purchase and assumption of control etc.).

ii.          How feasible and effective is the merger and acquisition option as a strategy for growth and sustenance of the banking industry.

iii.        Is merger and acquisition the best panacea for bank distress resolution?

iv.         In what ways has the Nigeria deposit insurance corporation   (NDIC) has managing the distress is the banking industry?

v.           How effective  has the Nigeria deposit insurance corporation  (NDIC) been a supervisory and regulatory authority in the banking system.

 

1.3   JUSTIFICATION OF THE STUDY

The deregulation of the banking industry in the late 80s brought about an increase in the number of banking institutions with competition. Each bank was struggling to increase its market share and profitability to keep afloat the shock created by the deregulation in a bid to avert distress. But, contrary to the expectations of some financial analysts, the industry was plunged into an acute financial distress, which led to the failure of some banks.

The thought of establishing the Nigeria insurance corporation is an indication that the problems arose from the liberalized licensing of banks and other deposit taking institution in the banking industry could be better managed and returned the lost public confidence into the system. Hence, the corporation came into existence to manage the problem through effective financial crisis management and risk aversion.

This study is primarily based on the feasibility of   merger and acquisition in the banking industry as a bastion of hope in lieu of liquidation and to checkmate the realities of bank distress and failures. The study also aims at contributing to the improvement of banking industry by demonstrating the practicability and efficacy of merger and acquisition as a strategically option for corporate growth and sustenance.

 

1.4   OBJECTIVE OF THE STUDY

The general objective of the study is to critically analysis the feasibility and efficacy of merger and acquisition as a bank distress resolution option. The specific objective are;

i.            To examine the practicability of merger and acquisition as a strategically option for bank growth and sustenance.

ii.          To examine the cost – effectiveness and cost benefit analysis of merger and acquisition option.

iii.        To examine the different ad best resolution option available to the Nigeria Deposit insurance corporation (NDIC).

iv.         To examine the impact of Nigeria deposition Insurance Corporation in managing distress.

v.           To make recommendation based on the data analysed and finding there from.

 

1.5   SCOPE OF THE STUDY

This study covers the in depth analysis of the impact of the NDIC on the control of distress in banking system and the efficacy of merger and acquisition as a resolution option to  prevent  back failures in Nigeria and the feasibility in Nigeria.

The duration of the study is limited to (1990 – 2002) when there was acute financial crisis and commencement of operations of NDIC.

 

1.6   RELEVANCE OF THE STUDY

The relevant of these study is to enhance and recommend way by which merger and acquisition and reduce the wave of distress in the banking industry and the deposit protection scheme of the Nigeria deposit insurance corporation (NDIC) can be sustained by public confidence. 

The NDIC is an independent body and acts as an additional regulatory authority in the supervision of bank to ensure compliance with regulation aims at ensuring bank solvency. The NDIC can also arrange for other bank to assume the deposit liabilities of a distress in the banking sector or take over the management of a bank where such action becomes necessary to protect depositor’s interest.

 

1.7   DEFINITION OF TERMS

Merger: This is the joining of two or more companies or firms together.

Deposit insurance: This is the financial guarantee instituted as a measure of safety for the banking system to protect depends.

Profitability: Means the ability of a bank to generate sufficient revenue in excess of their expenditure.

Distress: This is the state of suffering caused by lack of money.

Liquidity: This is the availability of ready money or cash to meet customer withdrawal.

Safety: Refer to the assurance that the loan granted would be repaid at maturity.

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