The Impact of Consolidation on the Performance of Banks in Nigeria-Profitability Perspective (2004-2012)

Abstract

This paper investigates the effects of consolidation on banks performance in Nigeria, using the profitability as measure of performance. The study used an Ex-post-facto research in design by analyzing the CBN publications and published audited accounts of 21consolidated banks out of 25 banks that emerged after the exercise. These banks were classified into stand-alone and merged banks. The study covers a ten year-period (2002-2012). Based on the objective, a hypothesis was formulated and tested using t-test statistic. The study found that there is a significant difference in the performance of the banks that stood alone and the banks that merged. Consolidation has increased significantly the profitability of merged banks as against that of the stand-alone banks. Thus the value gains that have been alleged to accrue from consolidation have been substantiated and this implies that the CBN consolidation decision is a right step in a right direction. The study recommends among other things that for the consolidated banks to avoid going back to the “distress syndrome” era the CBN has to ensure that all loop-holes are blocked to avoid abuse of funds especially from the banks chiefs. Again, these banks should be seriously checkmated against the un-professional and unethical way of sending young girls to source for deposits in forms of targets. Furthermore, the authority should make it a half-decade affair and more is to be done on adequate timing. Finally, the paper calls for an urgent implementation of the remaining reform agenda as planned by the former CBN Chief, Prof. Charles Soludo.

Keywords: Banks, performance, consolidation, profitability, merged and stand-alone banks.