Fallacy of banking consolidations in Nigeria. Empirical review of first phase of the reform between 2004 and 2009

Fallacy of banking consolidations in Nigeria. Empirical review of first phase of the reform between 2004 and 2009

Author by Dr. Tunji Siyanbola

Journal/Publisher: International Journal Of Advanced Research In Management And Social Sciences

Volume/Edition: 1

Language: English

Pages: 151 - 171

Abstract

Distress in banking industry has been worrisome right from the colonial period when banking institutions were less regulated as anybody who had money can establish a bank. As development and competitions became rampant, the focus of successive administrations has been to regulate the industry so as to safeguard the interest of the savings populace. This is part of what prompted the immediate past governor of Central Bank of Nigeria, Professor Charles Chukwuma Soludo, to borrow a leave from the success recorded in M&A in the banking industry embarked upon by the government of Malaysia. As at the last count he was able to prune the industry from the original 89 to 25 banks by January 1st 2006 after given 18 months ultimatum for the then existing banks to merge or be forced to wind up, if they eventually fail to recapitalise to the tune of N25bn. As beautiful as the programme was, there are some lapses; these lapses were addressed by this study. Promises made as stimulant for efficient result of the program was used as reference points. Questionnaires were distributed and 3 hypotheses were tested using Chi-square and t-test statistics for the relationship between the consolidation exercise and the lending rates; between the new policy and family bank in Nigeria and between the exercise and corporate governance existing in the consolidated bank. Based on the findings, it was recommended that CBN should:
(i) Enforce a lower lending rate regime especially for the manufacturing sector;
(ii) Dilute the ownership structure of the banks to check abuses;
(iii) Undertake corporate governance audit in all the banks.


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