TABLE OF CONTENT

iv

Title page

Approval page ————————————————— i

Dedication ——————————————————–ii

Acknowledgement  ———————————————-iii

Abstract  ———————————————————-iv

CHAPTER ONE;

1.0   Introduction          ———————————————-9

1.1   Background of the study ———————————-9-11

1.2   Statement of research problems ————————–11-12

1.3   Objectives of the study ————————————–12-13

1.4   Significance of the study ————————————13-14

1.5   Statement of research hypothesis ————————–14

1.6   Scope and limitation of the study —————————14

CHAPTER TWO,

2.0 Definition of concepts ———————————————15

2.1.1 Concept of recapitalization ————————————15

2.1.2 Banking Industry ————————————————16

2.1.3 Consolidation ————————————————–16-17

2.1.4 Reform ———————————————————–17-18

2.2   Theoretical Framework ——————————————-18

2.2.1 History of banks recapitalization in Nigeria ————–18-21

2.2.2 Bank consolidation through merger and acquisition —-

21-23

2.2.3 Organic (internal) Growth ————————————

23-27

v

2.3

Empirical Framework —————————————–

27

2.3.1 Historical Background of Banking in Nigeria ————-

27-33

2.3.2

Post Consolidation ——————————————

33-36

2.3.3 Examination of the capital base of Nigeria banks after

the consolidation exercise ———————————–

36-42

2.4

Challenges Facing the Banking Industry In Nigeria —–

42-48

2.5       Rationale for Recapitalization in the Nigerian

Banking Industry ———————————————48-50

2.6   Benefits of Recapitalization ———————————–50-56

CHAPTER THREE,

3.0  Research methodology —————————————–57

3.1   Method of Analysis ——————————————–57-58

3.2   Model Specification ——————————————-58

3.3   Estimation Procedure —————————————–58-59

3.4    Evaluation method ———————————————59

3.4.1 Evaluation based on Economic Criteria ———————–59

3.4.2 Evaluation based on Statistical Criteria ———————-60

3.5   Data Sources and Adjustments ——————————60-61

CHAPTER FOUR,

4.1   Presentation of Result ——————————————62

4.2   Analysis of the Result ——————————————-62

4.2.1 Analysis of the Regression Coefficients ———————62-63

4.2.2 Analysis of the Evaluation Method ————————vi

4.2.2.1Evaluation based on Economic Criteria ——————63-64

4.2.2.2Evaluation based on Statistical Criteria ——————64-66

4.2.2.3 Evaluation based on Econometric Criteria ————–66-69

4.3Evaluation of research hypothesis —————————–69-70

CHAPTER FIVE,

5.1   Summary policy recommendation and Conclusion ——-71

5.1.1 Summary ——————————————————–71-72

5.1..2 Policy recommendation ————————————72-73

5.1.3 Conclusion ——————————————————–73

Bibliographies

Appendices

vii

CHAPTER ONE

INTRODUCTION

1.1  Background of the study

The financial sector is one of the dominant economic sectors

in Nigeria. Banks are key players i sectors; they occupy a delicate position in the economic

equation of any country such that their (good or bad) performance invariably affects the economy of the country (Wilson 2006). Studies here shown that the banking sector which actually started in Nigeria in 1892 (Nwankwo 1980) has been largely volatile within spates of banking failure experienced in most parts of the 1990s and in the early and mid 2000s.

The strategy often utilized to strengthen banks in Nigeria and save them from financial distress is capital regulation by the central bank of Nigeria (CBN). A cursory look at the history of banking in Nigeria reveals that the CBN has found reason to share up the capital base of Nigeria bank, a number of times since 1980s from a modest value of N10million naira minimum paid up capital in 1988, Nigerian. Commercial

banks were required to maintain capita not below N50million in 1991. Between 1991 and 2005 subsequent increase have also been made ranging from N50million in 1997 N1billion 2001; N2billion in 2002 to N25billion in 2005 (Onaolapo 2006) within 18months and also to consolidate the banking institution through merger and acquisitions before 31 December 2005.

This was an effect to instill discipline into the financial system and to reposition Nigerian banks for global integration the governor of the CBN Charles Soludo (Prof.) on 6th July 2004 presented the 13point reform agenda at a special meeting of the bankers committee in Abuja on this new bank reforms.

The agenda was envisaged to facilitate greater mobilization of resources and improvement in financial intermediation, deepen and widen the capital and money markets and ultimately stimulate development of the private sector.

Prior to the banking sector reforms of 2004 there were 89banks with about 3,300 branches as at July 31st, 2004. The 89banks had a total asset of US and 18.0billion (Bullion CBN vol.30 No, 2). This was in sharp contrast to South Africa for example, where only 8banks had assets worth more than all

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