ABSTRACT

The recent Banking consolidation exercise in Nigeria, no doubt has generated a lot of debate. The consolidation just like any other previous one has a lot of prospect for National development because of the strategic position of banking industry in the Nigeria economy. While the consolidation exercise is a welcome development, this project aimed to offer advice to the monetary authority on the exercise, by tracing the historical development of banking industry in Nigeria, highlighting some previous in the banking sector and their effect on the industry itself and the economy at large. Similarly, this project discusses the benefits and problems that are likely to introduce from the implementation of the consolidation while prescribing some measure for effective and efficient implementation that will enhance the national development. The past consolidation challenges that may arise from the consolidation exercise of the Nigerian banking industry include:

v The major challenges of bank consolidation is how to foster competition with fewer, mega banks, that fewer banks are likely to be pressured to expand their branches.

v Bigger banks might not necessary fit more efficient since they have no incentive to improve efficiency within limited competitive field.

v Consolidated banks might not have capacity building for risk management for both the regulators and operators.

v Small and medium scale enterprises may be neglected in the area of financing in mega banks

v Consolidation exercise may lead to unemployment in the country and it cause another social problem to the economy.