The performances of commercial banks in post-consolidation period in Nigeria: An empirical review
European Journal of Economics, Finance and Administrative Sciences
Olabisi Onabanjo University, Ago-Iwoye, Nigeria; P.O.Box 1104, Ijebu-Ode, Ogun State, Nigeria
The current credit crisis and the transatlantic mortgage financial turmoil have questioned the effectiveness of bank consolidation programme as a remedy for financial stability and monetary policy in correcting the defects in the financial sector for sustainable development. Many banks consolidation had taken place in Europe, America and Asia in the last two decades without any solutions in sight to bank failures and crisis. The paper attempts to examine the performances of government induced banks consolidation and macro-economic performance in Nigeria in a post-consolidation period. The paper analyses published audited accounts of twenty(20) out of twenty-five(25) banks that emerged from the consolidation exercise and data from the Central Banks of Nigeria(CBN). We denote year 2004 as the pre-consolidation and 2005 and 2006 as post-consolidation periods for our analysis. We notice that the consolidation programme has not improved the overall performances of banks significantly and also has contributed marginally to the growth of the real sector for sustainable development. The paper concludes that banking sector is becoming competitive and market forces are creating an atmosphere where many banks simply cannot afford to have weak balance sheets and inadequate corporate governance. The paper posits further that consolidation of banks may not necessaily be a sufficient tool for financial stability for sustainable development and this confirms Megginson(2005) and Somoye(2006) postulations. We recommend that bank consolidation in the financial market must be market driven to allow for efficient process. The paper posits further that researchers should begin to develop a new framework for financial market stability as opposed to banking consolidation policy. © EuroJournals, Inc. 2008.