ABSTRACT
This project focuses on the post consolidation challenges faced
and opportunities had in the banking sector in Nigeria.
Highlighted in chapter one includes; Background of study,
objectives of study, scope of study, limitations of the study etc.
Chapter three discussed the Research Design, Population of the
study, method of data collection, statistical tool, etc.
In chapter four, data presentation and analysis were discussed
among others.
Lastly chapter five looked at the summary, findings, conclusion
and recommendation.
Table of contents
Title
-------------------------------------------------------------- i
Certification------------------------------------------------------ ii
Dedication
------------------------------------------------------- iii
Acknowledgement----------------------------------------------- iv
Abstract----------------------------------------------------------- v
Table of
content------------------------------------------------- vi
CHAPTER ONE:
Introduction
1.1 Back
ground of study ------------------------------------- 1
1.2 Statement
of problem ------------------------------------ 2
1.3 Objectives
of the study ----------------------------------- 2
1.4 Research
questions --------------------------------------- 3
1.5 Hypothesis
formulation ---------------------------------- 3
1.6
Significance of the study -------------------------------- 4
1.7 Scope of
the study --------------------------------------- 4
1.8
Limitations of the study --------------------------------- 4
1.9 Historical
background of case study ------------------ 5
1.10
Definition of terms -------------------------------------- 7
CHAPTER TWO:
Review of related literature
2.1
Introduction ---------------------------------------------- 9
2.2 An
overview of the banking sector ------------------- 10
2.3 Problems/
issues of the Nigerian banking sector --
12
2.4 Banking sector reforms
--------------------------------- 13
2.5 Pre Soludo
Reform Era --------------------------------- 16
2.6 Consolidation
-------------------------------------------- 17
2.7 Guidelines and incentives on consolidation
--------- 18
2.8 Objectives of consolidation
--------------------------- 23
2.9 Mergers and acquisition
------------------------------- 24
2.10 Post consolidation Challenges and
opportunities -- 30
2.12 Need for a regulatory framework
----------------------- 43
2.13 The Nigerian deposit insurance corporation
(NDIC)
and its
Role its role in the Nigerian financial safety net. 49
2.13 Bank
consolidation- Induced challenges to NDIC ----- 51
CHAPTER THREE Research design and methodology
3.1
Introduction --------------------------------------- 61
3.2 Research
Design -----------------------------------
61
3.3 Population
of the study --------------------------
61
3.4 Instrument
for data collection -------------------
62
3.5 Method
data collection ----------------.----------
62
3.6
Re-statement of research questions ------------ 63
3.7
Re-statement of hypothesis --------------------- 64
3.8 Validity
of the instrument ------------------------
64
CHAPTER FOUR:
Data presentation and analysis
4.1
Introduction
------------------------------------------------- 65
4.2 Data
presentation -------------------------------------------- 65
4.3 Data
analysis ------------------------------------------------- 65
4.4
Summary
---------------------------------------------------- 83
CHAPTER FIVE:
Summary of findings, conclusion and recommendations
5.1 Summary of
findings -------------------------------------- 84
5.2 Conclusion
-------------------------------------------------- 85
5.3
Recommendations ---------------------------------------- 86
Bibliography------------------------------------------------- 88
Appendix: Questionnaire
--------------------------------- 92
CHAPTER
ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Barter gave way to monetary exchange as the dominant trade
system around 3950 BC, and then was the imperative of banking born. Banking,
known to have been started by the Italian goldsmiths who settled in London at about the 17th
century to do business, began by accepting customers deposits of gold coins and
other valuables for safe keeping.
In Nigeria,
banking came with the advent of colonial masters (The British colonialists) in
the 19th century. Banking preceded banks. Banking is essentially
collecting deposits and lending to individuals and institutions experiencing
deficit for a fee and according to established rules, instructions and
procedures. The banking industry has however transformed over time. In the new
millennium, particularly in the last few years, changes in the fundamental and
social forces affecting banks have been witnessed. Factors such as double-digit
inflation, unemployment, foreign currencies, liquidity mop-up, new financial
products and services, revised pricing strategies and guided deregulations have
completely reshaped the financial industry. Banking has become computerized.
Electronic banking is the most common form of banking today. The use of credit
cards and automatic teller machines has been adopted as modern banking
procedures.
Most industries go through a cycle; entry, growth,
Consolidation, maturity/shakeout. Consolidation is simply another way of saying
survival of the fittest (bigger, more efficient, better capitalized, more
skilled etc). Consolidation is part of the natural evolution of industries;
Obafunmilayo Agusto (CBN report).
Consolidation is primarily driven by business motives and/or
market forces and regulatory interventions. The Banking Sector in Nigeria has
gradually been consolidating over the years. But the question “is consolidation
a solution for banking inefficiency?” still remains.
1.2 STATEMENT OF PROBLEM
The importance of banking and issues emerging from the banking
sector in Nigeria
has prompted several questions in the minds of the Nigerian public. This study
is designed to give answers to those questions
1. Why did
consolidation result in the Nigerian banking sector?
2. What was consolidation aimed at?
3. How was
consolidation carried out in the Nigerian banking sector?
1.3 OBJECTIVES OF THE STUDY
Consolidation is an important phase in the cycle of industries,
hence the general objective of this study is to give details on banking sector
consolidation and also analyzing its challenges and opportunities. Furthermore
the study aims specifically at
1.
Giving
reasons for consolidation
2.
The
achievements of consolidation
3.
Showing
how consolidation was carried out in the banking industry
4.
Giving
details on the survival of banks. This includes merging and acquisition.
5.
The
idea of the central bank of Nigeria
over consolidation
6.
The
need for a regulatory framework for banks and the formulation of such
regulatory framework.
1.4 RESEARCH QUESTIONS
This study is designed to give answers to the following
1.
What
were the challenges faced by the Bank during the recapitalization or
consolidation era?
2.
How did
the bank survive?
3.
What
are the opportunities present?
4.
Conclusively,
did consolidation favour the bank?
5.
Were
there significant impacts on the bank due to consolidation?
6.
Is
corporate governance strictly adhered to by the bank?
1.5 HYPOTHESES FORMULATION
The researcher is aiming at enquiring the impact of
consolidation on the banking sector of Nigeria. The researcher in this
study tries to test the following
Hypothesis
I
H0: Consolidation
has no significant effect on the performance of banks
H1: Consolidation
has a significant effect on the performance of banks
Hypothesis
II
H0: There
are no post consolidation challenges and opportunities for banks
H1: There are post
consolidation challenges and opportunities for banks
1.6 SIGNIFICANCE OF THE STUDY
The banking sector of Nigeria contributes immensely to
the wealth of the nation and to economic growth and therefore is a relevant
case study in event of restructure. This study is focused on enlightening the
society at large on the events in the banking sector, specifically pre and post
consolidation. It also focuses on bringing to knowledge the activities of
consolidation, the rulers of the banking sector. Academically, this study is an
expansion of knowledge. In recent times, the banking sector of Nigeria has
contributed to the high employment rate hence it is a source of livelihood even
to the nation Nigeria, therefore a significant event as bank consolidation is a
relevant area of study
1.7 SCOPE OF THE STUDY
The researcher intends limiting the scope of the study to a case
study. Analysis and conclusions are based on the banks activities. The
authenticity and correctness of the conclusions depends on the reliability of
the source of the data. He also limits his assumptions on the formulation of
hypothesis i.e. method.
1.8
LIMITATIONS OF THE STUDY
The limitations encountered by the research in the course of
carrying out this research are:
a.
Financial
constraints: The researcher conducted this research with limited financial
assistance.
b.
Difficulty
in getting the attention of bank staff: In conducting this research, the
researcher encountered difficulties in getting the attention of bank staff.
c.
Distance
or proximity to bank: The researcher
also found it difficult to meet up to several engagements due to the distance
of the bank from his location.
d.
Concealing
of information by staff: Due to the nature of the respondents of the
questionnaire (Bank staff), the researcher found it difficult to obtain several
information and data. Also access was not fully granted to the researcher on
his required materials.
1.9 HISTORICAL BACKGROUND OF UNITED BANK FOR AFRICA
PLC
The
United Bank for Africa (UBA) was incorporated in Nigeria as a limited liability
companion 23rd
February 1961 under the companies’ ordinance (cap 37. It took over the assets and liabilities of
the British and French Bank Limited, which had carried on banking business in Nigeria since
1949. The bank shares are currently quoted on the Nigeria Stock Exchange (NSE).
It
had branches all over the country. With its network throughout the country, if
both domestic and international bank with worldwide connections.
The
company is engaged in the business of banking and provides corporate,
commercial consumer and international banking, trade services, cash management transory
and capital market services and products. Trust services, pension management
services are provided through a subsidiary company, UBA capital and Trust
Limited (previously UBA) Trust Ltd)
THE BOARDS OF
THE BANK
The
affairs of the bank are administrated by Board of director comprising a
non-chairman and 17 other directors of whom 5 are executive including the
managing Director and chief Executive officers.
The Board meets at least 4 times a year to conduct the affiars of the
bank. In addition, the Board currently has 6 committees to consider in more
detail, various aspects of the Boards responsibilities.
The
business strategy committee recommends strategic initiative to the Board and
reviews human resources development at the more senior level of the Bank.
·
The ethnic and
corporate governance committee ensures best practice in corporate governance,
ethic and compliance with all applicable laws and regulation.
·
The executive
management committee ensures implementation of strategy and operational
management of the bank.
·
The government and
public affairs committee maintains good public relations with the government
and various stakeholders.
·
The nomination and
evaluation committee review executive performance, compensation and succession planning.
·
The risk management
committee considers and approved the credit and risk management policies of the
bank
·
However, inspite of
the seemingly impression programmes and progress as well as achievement of the
bank, things seems not quite all right. There is acute economic depression
allover Nigeria
– the business environment in which the bank operates.
This
has compelled the banks to operate budget deficits, i.e a state at which the
bank spends more than its revenue. This by itself creates a curious compensation
problem.
1.10 DEFINITION OF TERMS
Capital base: This refers to paid-up capital and reserves unimpaired by
losses.
Reserves: Assets kept back for future use. It includes all reserves
except asset revaluation surplus resulting from revaluation in the course of
consolidation.
Paid-up capital: This
refers to ordinary shares plus non-redeemable preference shares.
Parties to the Consolidation: In
the merging of banks, their boards and managements, financial/investment
advisers, lawyers, accountants, auditors, shareholders and any other persons
involved in the transaction are parties to consolidation.
Barter: To exchange goods and services in return for other goods
and services.
Bank: A business that keeps money for individual people or companies,
exchanges currencies, makes loans, and offers other financial services.
Consolidation: The bringing together of business or business activities into
a single unit.
Merger: The fusing together of two or more companies or organizations.
Acquisition: Asset that has been recently acquired.
Financial statement: A statement that shows the financial activities of a company
for a given year.
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