EFFECT OF MERGERS AND ACQUISITIONS ON PERFORMANCE OF THE NIGERIAN BANKING INDUSTRY 1998 – 2012

EFFECT OF MERGERS AND ACQUISITIONS ON PERFORMANCE OF THE NIGERIAN BANKING INDUSTRY 1998 – 2012

ABSTRACT

This study examined the effect of mergers and acquisitions on the performance of Nigerian banking industry.  In order to strengthen the competitive and operational capabilities of banks in Nigeria with a view towards returning global and public confidence to the Nigerian banking sector and the economy in general, the Central Bank of Nigeria instituted a banking reform in 2004, which saw most of the then existing 89 banks merging with each other.  The fundamental objectives of this research is to ascertain the impact of mergers and acquisitions on the liquidity profile of commercial banks in Nigeria, examine how mergers and acquisitions adopted by commercial banks impacted on the return on equity of the affected banks, evaluate the impact of mergers and acquisitions on the debt/equity profile of commercial banks in Nigeria and examine the extent to which earning per share of commercial banks improved as a result of mergers and acquisitions. An ex post facto research design was adopted in this study.  The population of the study comprises of all 21 commercial banks in Nigeria.  The study covered a period of 15years from 1998 to 2012. Secondary sources of data were used in this study.  The data were handpicked from the annual reports of the sampled banks and internet.  The data obtained were analyzed using panel data analysis.  The method of estimation used is the Ordinary Least Square (OLS).  The result of the study indicated that overall mergers and acquisitions has a positive effect on the liquidity profile, return on equity, debt/equity profile and earning per share of commercial banks.  The study recommends that the monetary authorities should establish an institutional framework to sustain the positive and improved performance of the banking industry in response to mergers and acquisitions.