CHAPTER ONE
- INTRODUCTION
- BACKGROUND OF THE STUDY
The banking sub-sector and indeed the financial sector of any economy is a dynamic one. In Nigeria, the dynamic nature of the banking industry has resulted in the various changes that have been experienced since 1982, when the country witnessed the emergence of the first bank in the country. The bank of British West Africa which later changed its name to standard bank of Nigeria limited and finally the present first bank of Nigeria plc. As time went on many years later, other banks began to spring up by both foreign and indigenous inventors. As a result of this Nigerians gradually began to develop banking habit and the financial sector began to expand.
However, the trend later became an all- comers affairs as banks began to spring up under the “non regulative” atmosphere. This could only result in high rate of bank mortality between the later b40s and early 50s. These issues of bank mortality became a thing of concern to both government and the banking public, hence the pronouncement of the first banking ordinance in 1952.
It should be noted that one of the major reasons is inadequate capital base. This therefore, has been the reason behind the upward review of the minimum capital base for banks that has been witness in this country from #25,000 in the 1952 ordinance to the recently pronounced #25,000,000,000 that has already been implemented from December 31st 2005.
The pronouncement by the CBN governor Professor Charles Soludo on July 6 2004 has raised a lot of comments and even opposition especially from the owners of the small banks who were the worst hit.
This informed the reason behind the issue of mergers and acquisition in which banks were advised to embrace as the major option to recapitalize the banks.
- STATEMENT OF THE PROBLEM
The recent outbreak of bank merger in Nigeria is attracting much attention, partly because of heightened interest in what motivate firms to merge and how mergers affect efficiently. The following identified problems in merger and acquisition necessitated for this study which includes:
- Structural and brand implication of the merger and acquisitions option in the post consolidation era.
- Improper motive behind corporate merger and acquisitions
- Low impact of mergers and acquisition on bank efficiency.
- Unhealthy competition as a result of mergers and acquisitions in the Nigerian banking sector.
- OBJECTIVES OF THE STUDY
The purpose of this research is to examine the overall motive for banks merger and acquisition in the Nigerian banking sector. The study will also focus on the following.
- To critically evaluate the structural and brand implications of the merger and acquisitions option in the post consolidation era.
- To identify the motive behind corporate merger and acquisition.
- To investigate the impact of merger and acquisition on bank efficiency.
- To examine the impact of merger and acquisition on the level of competitiveness in the Nigeria banking sector.
- RESEARCH QUESTIONS
The study will examine the following questions:
- What are the implication of bank merger and acquisition?
- What are the motive behind bank mergers and acquisition?
- How do merger and acquisition impact on efficiency?
- How would bank merger and acquisition affect competition in the Nigerian banking sector?
- SIGNIFICANCE OF THE STUDY
The significances of this study is to enlighten the general public on the following
- The effect of bank consolidation on the economy of Nigeria
- The impact of consolidation on the performance of bank in Nigeria.
- To bring to light the state of Nigeria banks financially and to encourage the masses to drop their fears and pick up the habit of savings again.
- To show to inventors that the state of the banks has undergone a lot of change through consolidation and hence a sure ground for good inventors.
- To relates to the evaluation of mergers and acquisition in terms of its impacts on efficiency in the post-consolidation era in the Nigeria banking sector. This will serve as a yardstick for the justification for the recent bank merger and acquisition in the Nigerian banking sector.
- SCOPE AND DELIMITATIONS OF THE STUDY
Here, the researcher wished to study the challenges and opportunities facing the recently concluded mergers and acquisition in banking sector in Nigeria.
However, this research does not intend to cover the legal frame work governing mergers and acquisition. The focus is directed towards mergers and acquisition of profit making organization like the banking industry. The case study here is the recently merged platinum and Habib bank to form keystone bank which is formally known as bank PHB and five other banks intercontinental bank plc (Access bank plc), Oceanic Bank plc (Eco Bank plc), Fin Bank plc ( first city monument bank plc), Equatorial Trust Bank plc (sterling bank) and union bank plc (share holders and African capital Alliance Group).
- DEFINITION OF TERMS
MERGER: The living Webster Encyclopedia dictionary defines merger as “The legal combination of corporations in which their assets are transferred to resulting Successor Corporation”.
ACQUISITION: Webster also defines acquisition as “the act of acquiring or of making acquisition that which is acquired or gained”.
BANK: Bank is an establishment for keeping money and valuable safety. Webster in his own definition saw bank as the office in which the transaction of a banking company are concluded.
CAPITAL MARKET: is defined as “The stock and other institutions where shares are bought and said”.
CONSORTIUM: Is defined as “A group of companies or banks combining to run a project”.
CREDIT CARD: A card normally made of plastic which allow the holder to obtain goods and services up to some limits.
LIQUIDATIONS: A process of choosing down a business and disposing of its asset.
STAKE HOLDERS: Anybody with some firm of interest in a business.
DISTRESS: Is defined as “Anybody or thing that is in pain, hardship, danger and needs help”.
RECAPITALIZATION: A reversal form of the capital organization of a corporation.
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