Impact of banking consolidation on the performance of the banking sector in Nigeria

Following the consolidation of the Nigerian banking sector in 2005, to among other things, develop a strong and reliable banking sector capable of supporting the development of the domestic economy, this paper examines the performance of the programme by comparing the pre- and post-consolidation performance of the sector. Two independent samples representing the 9-year period preceding the 2005 banking consolidation exercise and the corresponding 9-year post consolidation period were analyzed. Performance assessment indicators analyzed in the study are non-performing loans ratio (asset quality), return on assets (earnings/profitability), capital adequacy ratio (long-term liquidity) liquidity ratio (shortterm liquidity), bank loans and advances ratio (credit delivery) and bank assets ratio (bank size). Levene's independent sample t-test was used to determine evidence of significant difference in banking sector performance between the pre- and post-consolidation periods. At 5 per cent level of significance, the study shows evidence of significant differences in asset quality, capital adequacy ratio and loans and advances ratio. However, there is no evidence that return on assets, liquidity ratio and bank asset ratio differ significantly between the pre- and post-consolidation periods. Based on the above results, we conclude that banking consolidation significantly impacted on banking sector performance in Nigeria. We therefore recommend introduction of adequate regulatory measures, by the relevant authorities, in the sector as well as implementation of robust human capital development initiatives as imperatives for nurturing and sustaining the gains of the exercise.