1.1 BACKGROUND OF STUDY
Nigerian banking reform is a product of the global efforts at revamping the world economy. First it was a Millennium Development Goals (MDG), next it was New Partnership for African Development (NEPAD), before the National Economic Empowerment and Development Strategy (NEEDS). All these have one thing in common the economic development of Nigeria. For a long time in the history of policy reforms in Nigeria, developing the banking sector was given priority attention. Various directives were given to the banking sector with the aim of developing other sector, thus propelling the entire economy. The directive of raising the minimum capital of each bank to twenty-five billion naira (N25b) was mostly achieved through banks consolidation by the instrumentality of mergers and acquisitions (M & A). Implicit in the capitalization directive is the belief that stronger banks would act as spring board for the growth and development of the other sectors of the economy especially cottage industries and other small and medium scale enterprises (SMSE).
Over the years, the banking industry was in a dwindling state, until the then governor of Central Bank of Nigeria, Charles Soludo came up with the idea of reforming the Nigerian banking industry through mergers and acquisitions.
The interest to undertake the study on mergers and acquisitions is to enable the researcher to examine the benefits of the subject to the organization concern, the shareholders and the economy. To this end, will mergers and acquisitions on banks brings about stability in the banking industry; enhances high assets quality, increases the shareholders funds, improves the quality of service render to the customers through technological advancement as well as promoting the banking public confidence?
Further more, in the area of our national economy, will mergers and acquisitions in banks generate more employment, mobilization of foreign savings accessibility of small scale funding and above all provide solid financial institutions that can finance major projects that will enhance the country’s economic development? All these will be revealed on the course of this research work.
1.2 STATEMENT OF PROBLEM
The problem this study is set to address is that there seems to be conflicting opinions on the merits and demerits of the bank consolidation on the bank. Some said that since the consolidation was carried out in a rush, consequently it warranted marriages of strange Bedfellows, reduction in staff strength in the banks, and others which are likely to increase the risk content of banking in Nigeria.
Mergers and acquisitions is viewed with skepticism. Business management executives dislike the idea, therefore a lot of disagreement on the benefits associated with the concept.
Management experts said that mergers and acquisitions do create five general problems, such as complex accounting, repositioning downsizing and legal tussle.
1.3 PURPOSE OF THE STUDY.
The purpose of this study is to examine the impact of mergers and acquisitions on banks in Nigeria in relation to the recently concluded consolidation exercise carried out by the Central Bank of Nigeria (CBN) on banks.
The objectives of the study among others include;
1) To determine the quality of banks assets
2) To evaluate the banks earning performance
3) To determine the liquidity ratios of the banks
4) To determine the level of bank capital adequacy.
5) To determine the management efficiency of the banks.
6) To make recommendations based on observations and findings.
1.4 RESEARCH QUESTIONS
The purpose of the study is to examine the impact of mergers and acquisitions on Banks in Nigeria. For realization of the above objective, great efforts were made to proffer answers to the following research questions.
1) Do Mergers and Acquisitions improve the capital adequacy on Banks in Nigeria?
2) What impact does mergers and acquisitions has on the bank’s earnings.
3) Do Mergers and Acquisitions improve the Assets quality of banks in Nigeria?
4) What impact does mergers and acquisitions has on the liquidity level on banks in Nigeria?