ABSTRACT
This
study assessed the Effect of Recapitalization in the Banking Sector- A case
study of Skye Bank Plc.
Based
on the set objective of the study, structured questionnaire consisting of
eighteen (18) closed ended questions in both Section A and B (2) open ended
questions were developed and administered on hundred (100) respondents of the
aforementioned case study, with which a total of 87 were completely filled and
returned.
Hence,
the methodology employed the primary and secondary methods (i,e questionnaire
method, interview method, and library method).
However,
from the analysis of the data generated and with the aid of chi-square method,
the following findings were concluded:
·
There is a significant relationship
between recapitalization of banks and productivity.
·
Recapitalization of the banking sector
has impact on the Nigeria
economy.
Therefore,
the study suggested that this research work should be more current, more
challenging and useful. Hence, more research works should also be conducted in
order to cover a wider scope.
TABLE OF CONTENTS
Title
page i
Certification ii
Dedication
iii
Acknowledgement iv
Abstract vi
Table
of content vii
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
1.2
Statement of problem
1.3
Objectives of the study
1.4
Statement of Research Hypotheses
1.5
Research Questions
1.6
The Importance of the study
1.7
Scope of the study
CHAPTER TWO
LITERATURE REVIEW
2.1
What is Banking
2.2
What is Consolidation
2.3
Merger
2.4
Reason for Merger and Acquisition
2.5
Regulation of Merger and Acquisition
2.6
The Current Development in the
Nigerian
Banking
Industry
2.7
Why is Recapitalization Necessary to
Improve
the Economy
2.8
Why Merger and Acquisition
2.9
Reason for Merger and Acquisition
CHAPTER THREE
RESEARCH METHODOLOGY
3.1
Introduction
3.2
Research Design
3.3
Study
Population
3.4
Sample Techniques / Procedure
3.5
Sample Size
3.6
Description of Research Instrument
3.7
Method of Data Analysis
3.8
Reason for Choosing Chi-square
CHAPTER FOUR
DATA ANALYSIS AND INTERPRETATION
OF RESULTS
4.1
Background information
4.2
Socio-Economic Characteristics is
Sample Size
4.3
Research Questions
4.4
Test of Hypothesis
CHAPTER FIVE
SUMMARY, MAJOR FINDINGS,
CONCLUSIONS AND RECOMMENDATION
5.1
Summary
5.2
Major Findings
5.3
Conclusions
5.4
Recommendations
Bibliography
Appendix
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
The banking industry is very important in the
economic development of any country. The banking industry or its development in
Nigeria
has experienced weakness during the growth from its infancy to the present
state of development’ it has been exposed to all types of conditions ranging
from banking failure to government legislations.
The banking in Nigeria stated as far back as 1892
when the African banking corporation was established in Lagos at the invitation of Elder Dempster
Company. Probably arising from the good
performance of the African banking Corporation, another bank opened its branch
office in Lagos
in 1894. The bank of West Africa Limited now called First Bank of Nigeria Plc
however, enjoyed the monopoly of banking business in Nigeria until 1916, when another
colonial bank was established.
In 1925, the assets and liabilities of this bank
were taken over by a consortium of banks to form a new bank named Barlays bank DCO and now changed to Union Bank for
Africa, Arab bank, International Bank for West Bank of India, Bank of American
and chase Manhattan Bank.
This discriminatory attitude of those banks
against indigenous people led to the establishment of the first indigenous bank
in 1929, which went into liquidation in 1930, another indigenous bank, the
Nigerian Merchant Bank was established in 1931 with an initial paid up capital
of N3,400, but went into voluntary liquidation in 1936. However, in 1933,
another indigenous bank institution was formed as National Bank of Nigeria with a
nominal capital of N20,000. And due to its excellent performance twenty three indigenous
banks were established between 1945 and 1960, out of which only three survived,
namely; National Bank of Nigeria, Agbonmagbe Bank (Now Wema Bank Plc) and
African Continental Bank Plc.
To the new Governor or Central Bank of Nigeria,
excellent banking should embrace recapitalization to ensure that the banks have
large capital and acquire large assets to meet up the policy shift. The
policy’s agenda was to reposition the CBN (Central Bank of Nigeria) and
the financial system for the 21st century, with the goal to
consolidate and build upon the achievement
of the sector in the past decade and take the system to greater heights.
To ensure that the first phase of the policy is
carried out, the Nigerian. Banking system was consolidated through
recapitalization with an option of merger and acquisition.
The second phase of the policy addressed the issue
of diversification which includes programmes to encourage the emergences of
regional and unit / specialized banks.
However, after the initial shock with which the
bank executives received on the announcement of the policy by the CBN Governor,
many banks have been announcing their plans for raising funds as capital
towards meeting the deadline of 31st
December 200 for the recapitalization programme as announced.
At the initial stage of the announcement, fewer
banks made known their plans to consolidate. Such consolidation led to mergers
or acquisitions or a combination of both as recommended by the CBN, in addition
to raising fresh capital in the capital market via right issues. Private
placements, public offers, intake of strategic
foreign core investor(s) among others.
Consolidation arrangements by the involving banks
at the signing of memorandum of understanding (MOU) led to the Birth of five
mega banks. First consolidated Bank comprising of five banks (All State Trust
Bank Plc. Gulf Bank of Niger Plc,
Hallmark Bank Plc, Lion Bank of Nigeria Plc and Universal Trust Bank Plc);
Intercontinental Group comprising of
four banks (Equity Bank of Nigeria Ltd, Gateway Bank Plc, Global Bank Plc and Intercontinental Bank Plc). Astra Bank
comprising of (Assurance Banks Nigeria Ltd, First Atlantic Bank Plc, Guardian
Express Bank Plc and Manny Bank Nigeria Plc); Sterling Bank comprising of (ETB
International Bank Plc, Magumn Trust Bank, NBM Bank Ltd, Prudent Bank Plc and
Trust Bank of Africa ltd). Finally Wema Bank Group Comprising (Fountain Trust
Bank lc, Lead Bank Plc and Wma bank Plc).
However, some banks who met 25 billion naira
capital base alone in this category are Zenith International Bank Plc, Standard
Trust Bank Plc and Guaranty Trust Bank Plc whom also went ahead to acquire
another Bank-Inland Bank Nigeria Plc. Also, First Bank of Nigeria Plc, Union
Bank of Nigeria Plc and United Bank for Africa Plc often referred to as “the
big 3” hope to meet the 25 billion naira capital based by the deadline of
December 31st 2005.
Banks like First City Monument Bank Ltd is targeting to have 30 billion
naira capital base. The current consolidation
process in the banking sector might turnout to be the turning point of the
Nigerian economy toward growth and development.
1.2
STATEMENT OF THE PROBLEM
This research examine the effect of
recapitalization in the banking industry on Nigerian economy. There is a
general expression of dissatisfaction in many cases of performance evaluation
in banking industry for the following reasons.
1.
What
necessitated the Nigerian banking system consolidation?
2.
What are the
challenges facing the Nigerian Banking?
3.
How viable is
recapitalization of most banks who are still strangling to survive?
1.3
OBJECTIVES OF THE STUDY
This research project aims at ascertaining the
effect of recapitalization in the banking industry on Nigerian economy
particularly Skye Bank Plc.
1.4
STATEMENT
OF THE RESEARCH HYPOTHESIS
Hypothesis
is a tentative statement of the truth put forward and used as a basis for
further investigation by which they may be approved or disapproved. Hence, for
the purpose of this research to be
achieved, the following hypotheses will
help verity the research statement.
1. Ho: There is no significant relationship between recapitalization of
banks and productivity
Hi: There is a significant relationship between
recapitalization of banks and productivity
2. Ho: Recapitalization of the banking sector
does not have impact on the Nigerian Economy
Hi: Recapitalization of
the banking sector does not have impact on the Nigerian Economy
1.5
RESEARCH
METHODOLOGY
This
research work employed the use of questionnaire to source fro information on
recapitalization as it affects banking industry. The questionnaire is designed,
to a strict business point of view. The questionnaires are drawn up fro this
study to cover the relevant areas of the study.
1.6
THE
IMPORTANCE OF THE STUDY
The
significance cannot be overlooked. The banking sector no doubt plays a special
role in the economy. The banks must be able to mobiles enough savings for
financing development activities in the
economy. This role can only be actively performed, if the banks merge to meet
up the capital base in delivering their services. In addition, with the
prevailing economic circumstances and an upsurge in the numbers of Banks in the
country, it became imperative for banks to merge, to avoid take – over. This
will enable them market their services so as to remain viable in the
competitive industry. Since banking market is gradually becoming buyers’ market
it is for banks to merge and met the proposed capital base and even strive
higher.
1.7 THE SCOPE OF THE STUDY
This
research is designed to cover Nigerian banking industry generally but with
special reference to the Nigerian economy. It involves the use of merger and
acquisition to force banks to consolidate so as to meet up the new capital
base.
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