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The inability of most Nigerian banks to meet stated objectives is a contemporary challenge plaguing the banking industry. There is an exigent need to ameliorate such malady and reposition such banks for excellence. Prominent among the different strategies adopted by most banks in order to curb such menace and enhance its performance is merger and acquisition. Merger and acquisition is the voluntary or statutory combination of individual entities, its assets and liabilities in order to achieve synergy. The fact that merger and acquisition was seen as a possible panacea that seeks to redress the protracted and seeming intractable problems faced by the Nigerian Banking industry cannot be over emphasized. It is based on this premise that a proper investigation was carried out to test its viability, adequacy and reliability as a tool of change and socio-economic salvagery.

This examination was conducted through the administering of 100 questionnaires to UBA and Zenith Bank which are two prominent banks in Nigeria of proven, tested and impeccable financial bank record. Opinions where gathered from the respondents and the hypothesis where analyzed using chi-square statistical tool.

The inferences made was that merger and acquisition has not been able to provide a whollistic solution to the daunting challenge that has encumbered the smooth operation and continuous survival of most banks in Nigeria and other strategies should be considered of which foreign investment was most prominent amongst all the alternatives proffered.






The banking operation in Nigeria began in 1892 under the control of the expatriates and by 1945, some Africans including Nigerians had established their own banks. During this period these banks experienced failure due to the illiquidity of banks. Banks then did not have enough liquid assets to meet customers demand, the financial systems were also not well organized and it lacked financial instruments to invest in. Hence, banks merely invested in real assets which could not be easily realized to cash without loss of value in times of need. The period (1959-1969) marked the establishment of formal money, capital markets and portfolio management in Nigeria. In addition, the companies’ act of 1968 was established. This period could be said to be the genesis of serious banking regulation in Nigeria. With the central bank of Nigeria (CBN) in operation, the minimum paid- up capital was set at four hundred thousand naira (USD$ 480,000) in 1958.

By January 2001, banking sector was fully deregulated with the adoption of the universal banking system in Nigeria which merged merchant bank operation to commercial banks. In the 90’s proliferation of banks, which also resulted in the failure of many banks, led to another recapitalization exercise that saw banks capital base being increased to five million naira (USD$5.88) and subsequently  two billion naira (USD $0.0166 billion ) and in 2004 it was increased  to twenty five billion naira.

In terms of number of banks and minimum paid capital, between 1952 -1978, the banking sector recorded forty five (45) banks with varying minimum paid-up capital for merchants and commercial banks. The number of banks increased to fifty four (54) between 1979- 1987. In 1988-1996, it rose to 112 with a substantial increase in the minimum capital. The number of banks in Nigeria began to drop in late 90’s to one hundred and ten (110) with another increase in minimum paid – up capital, as at June 2004, there were eighty nine (89) banks and the final drop was in 2006 where the banks numbered twenty five (25).

Mergers and acquisition are a global phenomenon, with an estimated 4000 deals taking place yearly in different sectors of the economy. Merger and acquisition staged  in Nigeria in 2004/2005 with effect from January 1,2006 under the governorship of professor Charles Chukwuma Soludo at the central bank of Nigeria( CBN). He had a vision coupled with a goal which was to consolidate and build upon the achievements of the sector especially in the previous decade and to take the system to greater heights by increasing the capital base to twenty five billion naira.

Soludo (2004)  enumerated the fundamental problems of banks particularly those classified as unsound have been identified to include persistent illiquidity, poor asset quality, and unprofitable operations and stated the major problems of many banks as follows:

.   Weak corporate governance, evidenced by high turnover in the board and management staff, falling ethics, inaccurate reporting and non compliance with regulatory requirements.

.   Late or non publication of annual accounts

.   Cross insider abuses

.   Insolvency

.   Weak capital base

.   Over- dependence on public sector deposits e.t.c.

Upon the increase in capital base, Nigerian banks adopted different strategies to achieve the stipulated amount during the banking sector consolidation of 2004 and 2005, mergers and acquisition was the most suitable strategy to achieve consolidation and to penetrate into the new market and new geographical regions. Although it has been seen and exposed by literatures on the subject that 50% of mergers and acquisition end up unsuccessful Gadies, Rovit and Ormiston, (2003), Kaplan, 2002;  Scheneider, (2003) and  Weber et al.,( 1996).

After the banking exercise many stockholders felt all was well with their investments but the new CBN governor professor Lamido Sanusi Lamido appointed in 2009  in collaboration with the Economic and Financial Crimes Commission (EFCC) revealed that many banks had problems and where hiding the under the concept of creative accounting. This led to the removal of CEO’s/ Directors of five (5) different banks, injection of 600 billion naira into banks and the appointment of new CEO’S/ Directors in these banks by the CBN.

Therefore, it is obvious that the mergers and acquisition that took place before 2009 was not successful indeed and there is every reason to examine its consequences and other best strategies to achieve a good merger and acquisition exercise and to boost the profits of banks in the long run.



Most banks in Nigeria see mergers and acquisition as the best strategy for survival and growth with ignorance of the fact that it has not yielded a remarkable increase in their performance because;

i         Banks fail to see the need for integration of managements from a merger and acquisition arrangement as a distinct business function which needs an experienced manager appointed specifically to oversee the process with a clear integration plan.

ii        Banks till date has failed even after the mergers and acquisitions exercise.

iii.      Soft issues of great importance such as culture have been ignored causing the unrealisation of the objectives of merger and acquisition.

iv       The adoption of either a merger or acquisition could be a very difficult and expensive venture with regards to the fund required for its success.




The following research questions will be asked in due process of this work;

i         Did the application of mergers and acquisitions in the past improve the performance of the banks in Nigeria?

ii        Are there other strategies available to these banks to improve their bottom line, asides mergers and acquisitions?

iii       Is ‘human factor’ a major cause of difficulty in making the integration of banks, work successfully?



The fundamental objectives of this study are;

  1. To examine the performance of banks after adopting mergers and acquisition.

ii        To highlight the possible challenges in adopting the strategy of merger and acquisition.


iii       To examine other strategies that are open to banks to improve their profit.



Through this research work, a general body of knowledge will be created as;

i         Those involved in banking sector reforms will be aware of the fact that merger and acquisition is not a thing you plunge into but requires steps that must be followed.

ii        Those in the banking industry will get to understand that there is need to pay attention to those issues that seem less ‘technical or soft’ and not the obvious only, as those issues are what the banks suffer today.

iii       This research work is also aimed at restoring confidence in banks, increasing their profit level and boosting their activities.

iv       Banks will be conscious of the fact that merger and acquisition is not just a game of how much spent, because a deal that is financially strong may ultimately be a disaster.



The scope of this study is to examine the impact of mergers and acquisitions on the performance of selected banks in Nigeria



This 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 as well as their willingness to give out sufficient, relevant, reliable and valid data necessary for this study. Also, the research is based on available materials in the internet and other relevant sources .



For the purpose of this study, the following hypotheses have been formulated from the objectives and will be verified bin the course of this research work.

HO: The application of mergers and acquisitions in the past has not improved the performance of the banks in Nigeria.

H1:  The application of mergers and acquisitions in the past has improved the performance of the banks in Nigeria.


HO: There are no other strategies available to these banks aside mergers and acquisitions.

H1:  There are other strategies available to these banks asides mergers and acquisitions.


HO: Human factor and cultural differences is not a major cause of difficulty in making the integration of banks, work successfully.

H1:  Human factor and cultural differences is a major cause of difficulty in making the integration of banks  work successfully.



For any research involving any component of banking and financial institutions, it will be necessary to begin by establishing and defining a number of concepts which will aid in making the determination of the optimal implementation of such components.


A merger refers to the combination of two or more organizations into a larger organization. Such actions are commonly voluntary and often result in a new organization.


An acquisition on the other hand, is the purchase of one organization by another. Such actions can be hostile or friendly and the acquirer maintains control over the firm.


Consolidation is a business combination where two or more companies join together to form an entirely new company. All of the combining companies are dissolved and only the entity continues to operate (Okonkwo, 2004).


This arises where the achievements and performance of the combined firm is greater in total value than the sum of the value of the separate firms. This is usually stated in the form of 1+1=3.

Holding Company   

This refers to a company, which has subsidiaries i.e. a company having controlling interest in one or more other companies. This requires having a controlling interest within the range of 10 and 50 percent of the stock of the company concerned.


This is an enterprise that is controlled by another company known as the parent or holding company.


Is a financial institution that accepts deposits and valuables for safekeeping and grant credit facilities.


This is where a company has shares in another company but does not exercise a significant influence (i.e. the interest is less than 20% of the equity rights).

Banking Industry

This is a sector in the economy and its main functions are financial intermediation and facilitation of the payment system.