MERGERS AND ACQUISITIONS IN THE NIGERIAN BANKING INDUSTRY

Background of study: Mergers and acquisitions have emerged as a strategic tool for achieving corporate expansion and growth. Analyses have the banks to benefit from new business opportunities that would be created by change in the regulatory and technological environment.

Aluo (2010) argue that Nigerian banks adopted different strategies to achieve the stipulated minimum capital base of N25 billion during the consolidation of banks in 2004 and 2005 which include mergers and acquisition. He further opines that mergers and acquisitions represent the widely used corporate strategy to penetrate into new market and new geographical regions, gain management expertise and knowledge or allocate capital. The question why mergers and acquisitions occurs has multiple answers. The often discussed reasons are synergy, agency costs due to self-acquirer managers, discipline of target management and managerial timing of high market valuation. It is also noted that mergers and acquisitions in the banking industry are aimed at achieving economies of scale and scope. Mergers also help in the diversification of products which help to reduce risk us well. Over the years, the Nigerian banking industry has experience progressive banking reforms and intervention by the regulator. These reform have brought about unprecedented transformation with far-reaching implication on the industry.In Nigeria, the series of the reform in the banking sector over the past three years became imperative when the central bank of Nigeria (CBN) identified poor corporate government, poor risk management practice and inadequate disclosure among other in the industry. Furthermore, following the successful conclusion of the recapitalization exercise, Nigerian banks is now wearing a second outlook.

The reform of the rescued bank which was finally resolved by CBN has unleashed tremendous change in the banking sector. The exercise has also placed the banking industry; ensuring a reliable and safe banking services; enhancing a sharp improvement in tern of transparency and accountability so as to induce the spirit of competitiveness and development-oriented banks.

Therefore. The intent of this study is to critically analysis mergers and acquisition in the Nigerian banking indstry and offer some required therapy to ensure optimal success in M&As