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The Effect of Bank Capitalisation on the Performance of Banks in Nigeria.

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The Effect Of Bank Consolidation On The Performance Of Banks In Nigeria Edit Article

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Top of Form
Bottom of FormCHAPTER ONE
1.0     BACKGROUND OF THE STUDY
The recapitalization and consolidation exercise in the banking industry by the former Central Bank of Nigeria Governor, Professor Charles Soludo has necessitated the need for different organization to engage in corporate Consolidation (mergers and acquisition). The concept of recapitalization refers to the current trend of compelling all commercial banks to raise their capital base from 2billion to 25billion Naira by the Central Bank of Nigeria on or before 31st December 2005. This has sent some of these banks on the move to consider Merger and Acquisition as a survival strategy. WHERE WE WERE BEFORE CONSOLIDATION

89 banks with 3,382 branches predominantly in the urban centres as at June 2004   characterized by structural and operational weaknesses such as: * Low capital base ; Dominance of a few banks
* Insolvency and illiquidity.
* Over dependence on public sector deposits and foreign exchange trading. * Poor asset quality.
* Weak corporate governance; A system with low depositor confidence. * Banks that could not effectively support the real sector of the company at 24% of GDP, compared to Africa average of 78% and 272% for developed countries. 1.0.1 THE VISION OF CONSOLIDATION ARE AS FOLLOWS:

* As Africa's financial centre and CBN as one the best in the world * Facilitate evolution of a strong and safe banking system * Improve transparency and accountability in the sector
* Drive down the cost structure of banks and make them more competitive and development oriented * A new Banking system that depositors can trust and investors can rely upon usher in a new economy There are indications that banks are now favourably disposed to Consolidation (merger and acquisition) after considering various options...