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Bank Name: FCMB Bank

Account Type: Savings
Account number: 7749601025

Bank Name: Access Bank

Account Type: Current
Account number: 0107807602





Banks are the linchpin of the economy of any country. They occupy central position in the country’s financial  system and are essential agents in the development process. By intermediating between the surplus and deficit savings’ units within an economy, banks, mobilize and facilitate efficient allocation of national saving, thereby increasing the quantum of investments and hence national output (Afolabi, 2004). Through financial intermediation, banks facilitate capital formation (investment) and promote economic growth.

The year 1995 and 2005 where particularly traumatic for the Nigerian banking industry; with the magnitude of distress reaching an  unprecedented level, thereby making it an issue of concern act only to the regulatory institution but also to the policy analysts and the general public. This the need for a drastic overhand  of the industry was quite apparent.

In furtherance of this general over handing of the financial system, the Central Bank of Nigeria introduced  major reform programmes that changes the banking landscape of the country in 2004. The main thrust of the 13 point reform agenda was the prescription of a minimum shareholders’ funds of N25 billion for Nigerian deposit money bank not later than December, 81, 2005. In view of the low financial base of these banks, they were encouraged to merge. Out of 89 banks that were in operation before the reform, more than 80 percent (75) of them merged into 25 banks while 14 that could not finalize their consolidation before the expiration of deadline where liquidated.

Because of the apparent advantage of efficiency related benefits, the banking industry has experienced an unprecedented level of consolidation as mergers and acquisitions among financial institutions have becomes a general phenomenon globally.

“For  instance between 1993 and 1996, about 1500 mergers were recorded in the  USA (Pilloff 2002, similar experience was observed in the Europe and Asian continents  (Shenk 2004).

To a large extents, this consolidation is based on a belief that gains accrue through expenses reduction, increased market power, reduced earnings volatility, and scale and scope economies. However, the characteristic of the kind of reforms induced mergers and acquisition of the banking industry creates doubts about its potentials of realizing efficiency gains.

A deeper look at the 25 banks that emerged after the consolidation shows that most banks that were regarded as distressed and unsound regrouped under new names or fused into existing perceived strong banks not necessarily to correct the inefficiency in their operating system but just to meet the mandatory requirement to remain of loat and to continue business as usual moreover, while there are myriads of studies on the effects of consolidation on other sectors of the developing economics, there is  penalty of studies on the effects of bank consolidation in developing countries like Nigeria.

The neglect of the issue is particularly surprising for these developing economies where the short run real effects of financial reforms have long remained controversial (Theriba 2008). And more so, the adoption of financial reforms has often been postponed, reversed shortly after being implemented or partially implemented for fear of recessionary consequences, indeed, ascertaining the empirical relevance of the implications of financial reform especially merger and acquisition on banking operating efficiency for developing economies in an important step in assessing the short run costs of overall economic reforms in these economies.

Mergers and acquisition or any other form of consolidation may influence bank interest rates, competition and transmission mechanism of monetary policy in so far as the increase in size and the opportunity for organization involved may either provides gains in efficiency that bear on marginal costs or gives rise to increase in market power, or both together.

This in view of the pivotal role the banking sector plays in the nation’s economy coupled with that as strategic plans, merger and acquisition generally affect the organization involved and has potential impacts on the economy in general, there is every need for a proper appraisal of the problem and challenges of the mergers and acquisition in the banking sector.

Statement of research problem

In keeping with the appreciation of the fact that the banking sector is made up of institutions which as custodians of money, play a pivotal role in the economy’ through the mobilization of savings and stimulations has this placed the banking sector under the search light of financial analysts, existing potential investors, economists, market money and indeed the generality of Nigeria and the partners in the global economic village.

To this end, this project by booking at the problems and challenges of mergers and acquisitions in the banking sector, will focus on the following research problems.

  1. Is mergers and acquisitions the option towards consolidating and strengthening the banking sector?
  2. Will mergers and acquisitions position the banks tragically to compete effectively in the highly competitive banking industry?
  • Will the banks in the post mergers era deliver effectively their fundamental role of financial intermediation?

Objectives of the Study

In line with the enumerated research problem, the objectives of the research will be gear toward the following:

  1. An appraisal of mergers and acquisition as a means of consolidating and strengthening the banking sector.
  2. A look at the possible strategic benefit to the merging banks against the background of the post banking sector reforms competition.
  • A critical analysts of the benefits of mergers and acquisitions in the banking sector to various stakeholders.

Research hypothesis

For a proper treatment of the identifier research objectives with  a view to addressing the issue of problem and challenges of mergers and acquisition in the banking sector. This research study will hypothesis as follow:

HO: Mergers and acquisition is not the best option towards consolidating and strengthening the banking sectors

HI:  Mergers and acquisition is the best option towards consolidating and strengthening the banking sectors.

HO:  Mergers and acquisition will not strategically position the banks to compete effectively in the highly competitive banking sector.

HI:  Mergers and acquisitions will strategically position the banks to compete effectively in the highly competitive banking sector.

HO:  Mergers and acquisition will not lead to jobs loss.

HI:  Mergers and acquisition will lead to jobs loss.

Scope of the Study

       This study is aimed at looking at the problems and challenges of mergers and acquisition in banking sector. Thus the scope of the study will cover:

  • The N25 billion minimum capitalization
  • Mergers and acquisition with emphasis on the problems and challenges.

Limitations of the Study

The study is only limited to selected banks in Nigeria. in compiling the data needed for this study, the scope of the study might be limited to the knowledge of respondents from the selected banks when the questionnaires will be administered and well as their willingness to give out sufficient, relevant, reliable and valid data necessary for the study.

Also, the research is based on available materials in the internet and other available materials in the interest and other relevant sources.

Significance of the Study

The relevance of the banking sector permates all sectors of the economy. To this end, this research will be significant to the under listed group.

  1. The banking public; for a better understanding of the dynamics and workings of the banking sector in the light of the N25 billion minimum capitalization.
  2. The government; CBN and other monetary authority; by using the banks as a vehicle for the implementation of its monetary policies, the government and its monetary authorities will find the outcomes of the study relevant in assessing the impact of its first phase banking sector reforms with a view to serving as an input in formulating subsequent banking reforms.
  • Financial analysts; as a input in assessing the relationship between assessing the relationship between the banking sector and other institution in the financial system like the Nigerian stock exchange (NSE).
  1. The real sector; in helping it assess the financial strength and capacity of the banking sector which will be used as a basis for determing to what extent it can get the needed support from the banking sector.

Definition of concepts and key terms

  1. Mergers: a form of business combinations in which the combining business lose their operational identity to other or another company formed for that purpose
  2. Acquisition: a form of business combination were the ownership and management of a distinct independently operating entity are operating and financial policies of a single management and ownership.
  • Banks; bank is a financial institution that accepts deposits and valuables for safe keeping and grant credit facilities.
  1. Synergy; this arises where the achievement and performance of the combined firm is greater in total values than the sum of the value of the separate firm is greater in total values than the sum of the values of the separate firm. This is usually stated in the form of 1+1 = 3.
  2. NSE: Nigerian Stock Exchange
  3. CBN; Central Bank of Nigeria. the apex banks of Nigeria charged with the responsibility of regulating the activities of banks and the implementation of monetary policies of the government.
  • Economic development; this is economic growth accompanied by charge in the structure of the economy.
  • Subsidiary; this is an enterprise that is controlled by another company.
  1. Consolidation; consolidation is a business combination where two or more companies join together to form a entirely new company. All of the combining companies are dissolved and only the entity continues to operate