Do M&A Really Matter for Banking Sector Growth in Nigeria?

International Journal of Research and Scientific Innovation (IJRSI) | Volume VI, Issue XII, December 2019 | ISSN 2321–2705

Do M&A Really Matter for Banking Sector Growth in Nigeria?

ELEJE, Edward Ogbonnia (Ph.D)¹, HARUNA, Abel Habila¹, & OGOHI, Gabriel²

¹Department of Banking and Finance, Federal University, Wukari, Taraba State, Nigeria
²Zenith Bank Plc. Abuja FCT

Abstract: – Merger and acquisition (M&A) lead banking sector growth argument has continued to garner more momentum since almost a decade and half ago precisely after the major Nigerian Banking sector consolidation in 2004/5. While the debate is on, several studies have concentrated efforts on group comparative estimation of the pre and post impact of M&A. But comparative growth impact assessment between merger option and acquisition option respectively is lacking. This paper is thus a contribution in this direction. Utilizing bank asset data generated from fourteen (14) deposit money banks (DMBs) categorized into Banks that stood alone (5); merged banks (4); and banks that acquired others (5) respectively, over a 12-year period (2006-2017), the paper sought to investigate if merger or acquisition or both significantly matter for banking sector growth in Nigeria. To achieve this, generated data were first descriptively analyzed and subsequently regressed with E-view-7 and SPSS-20 computer packages to generate optimal multivariate estimators at 95% significant level. Results revealed that acquisition was not significantly positive on bank growth but merger was both positive and significant and thus matter more for banking sector growth. The study therefore among others, recommends due diligence as way forward for acquirer mega-banks in the identification and correction of possible factors which abinitio made the banks they acquired unsound and distressed in order to achieve synergy in the new arrangement.

Keywords: Acquisition, Bank Growth, Bank Asset, Consolidation, Merger

I. INTRODUCTION

The role of the banking sector in propelling economic growth cannot be overstated. Studies have shown that a strong and virile economy depends to a very large extent on a robust, stable and reliable banking sector (Okpanachi, 2011; Salawu, 2013, Eleje, Osayi, Okoh, & Okoye, 2017). Imperatively therefore, there is the need to constantly reposition the banking sector for efficient and viable economic performance. Unarguably, reform process of the banking sector has been part and parcel of various governments’ strategic agenda. The reforms have aimed at fine-tuning the banking sector to meet the challenges of economic development.

Read More