Banking Sector Consolidation

Topics: Bank, Economics, Investment Pages: 13 (3496 words) Published: February 23, 2013


Since the bank consolidation promotion policy of the Federal Government began in earnest last year, a number of reforms have taken place in the Nigerian Banking sector. The ability of the industry players to embrace recapitalisation and the success of quite a number of banks in meeting the deadline stipulated by the regulatory authorities has indeed strengthened the faith of Nigerians in the financial system

With banks now embracing consolidation as a means of recapitalisation as well as the successes that have been recorded in this direction within the past 15 months, there are positive indicators that the previously shallow Nigerian financial system is on the verge of radical deepening.

The paper set out to examine the emerging trends in bank consolidation within the Nigerian banking sector till date with the aim of outlining strategies that will ensure increased efficiency and greater social and capital returns to both Nigerian banks and the national economy in a post consolidation era. In doing this, it will highlight the various challenges being faced by banks in the consolidation process and list out tested options to ensure that Nigerian banks achieve greater returns in real terms while improving on service delivery and repositioning for greater efficiency.



It is with keen interest that most Nigerians have monitored the developments that have unfolded within the banking industry over the past year.

Many critics of the consolidation policy of the Federal Government have been proven wrong. It is now apparent that the need for recapitalisation and consolidation was justified and the directive was well informed. The developments in the sector in the past months have opened channels for new prospects for the industry and placed it in prime position to be the driving force for the expansion of the Nigerian economy.

The task before the industry now is to ensure that the objectives behind the reforms which generally constitute building and fostering the development of a competitive and healthy financial system that is supportive of the development process, forestalling the incidence of systemic distress and deepening the financial system both in terms of the volume of assets and diversity of the financial instruments is achieved. The reforms are also geared towards ensuring that banks become stronger players in a manner that will ensure longevity and hence higher returns to shareholders over time and greater impacts on the Nigerian economy (Soludo 2004).

In doing this, banks must lay down proven strategies that will maximise returns not only in monetary terms, but also in the overall development of the Nigerian financial sector, its people and the economy as a whole.



Consolidation in itself is not alien to any industry. Rather it is a global phenomenon that is all embracing, not just in banking but also in major sectors such as oil and gas, telecommunications and information technology. Bank consolidation has successful taken place in America, with over 7000 mergers, in the United Kingdom and even more recently in developing economies such as Malaysia.

Bank consolidation has been at the forefront of the deepening of the financial systems of many developed and developing countries. It is on the basis of this that the Central Bank felt compelled to begin a policy initiated consolidation drive to further strengthen the capital base of Nigerian banks placing them in a better position to render long and short term finance for the development of the real sector of the economy. The state of the Nigerian banking industry in the preconsolidation era was unacceptable to say the least. With 89 banks, many with less than N3 billion as capital base and Government funds constituting over 50% of the deposits in some...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Banking Sector Essay
  • banking sector Essay
  • commercial banking sector in india Essay
  • Risk in Banking Sector Essay
  • Essay about Consolidation in Banking
  • Fdi in Banking Sector Essay
  • Mis in Banking Sector Essay
  • Essay about banking sector

Become a StudyMode Member

Sign Up - It's Free