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This study examined the effects of merger on the banking sector. The decline in bank profitability, rise in bank failures, decline in customer confidence among depositors, etc. served as the impetus for this study.

The study measured the impact of mergers and acquisitions on the profitability of commercial banks in Nigeria, looked at the impact on market share, and also looked at how mergers and acquisitions had improved customer service in commercial banks.

This study used a survey research design, which involved distributing a carefully constructed questionnaire to Eco Bank Plc, Asaba. The Chi-Square statistical techniques were applied to the study. I discovered that merger and acquisition had a good deal of significance and a bearing on how profitable commercial banks were.

A successful, goal-driven merger and acquisition policy should be driven by product and service innovation because merger and acquisition also have an impact on the quality of goods and services in the Nigerian banking sector. As a result, the researcher advised banks to devise ways to enhance their services.

Additionally, the government should keep an eye on the activities of merging banks through appropriate regulatory bodies like the CBN and NDIC to ensure efficiency.


The banking industry in Nigeria has gone through a number of significant transformations, starting with troubled banks in the 1990s to collapsed institutions and then the continued existence of these banks (Ogunleye, 2005).

Of the 115 banks in operation in 1997, 47 were in varied levels of difficulty, according to the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC), with an average ratio of non-performing assets of almost 82 percent.

Beginning with their joint control through “acquisition – in – trust” by the NDIC and the CBN for ultimate sales to private operators, distressed banks are first restricted.

According to Potter and Owen (2013), the banking sector, in particular, plays a critical role in economic development by encouraging and facilitating investment,

particularly in real sectors, which increases the quantity of goods and services produced in the economy, increasing national outputs and improving employment levels.

Nigeria’s banking sector can contribute positively because it is operating effectively. However, if the banking system is seen as ineffective and unable to deliver prompt, high-quality services, it could seriously impede economic growth and development.

This caused Nigerians to lose faith in the banking sector as it was noted that bank failure has been a problem since 1990, when one out of every two banks was distressed, and in the early 2000s, when one out of every three banks was either completely or marginally unsound, listed the core issues with Nigerian banks,

especially those that are classified as unsound, which include persistent illiquidity, poor asset quality, and unprofitable operations.

(Furlong, 2006) The Central Bank of Nigeria’s former governor announced on July 6, 2004, that the minimum capital requirement base of banks in the nation will be increased from N25 billion as a result of bank failures in the 1990s and early 2000s.

The new policy, which banks had to abide by by the end of December 2005, was designed to dramatically improve the operating environment for banks so they could carry out their intermediation duty successfully and effectively.

The new capitalization level for banks was intended to promote the consolidation of the banking sector through mergers and acquisitions (M and A). Supporters of this claim assert that banks in Nigeria investigated the possibility of M&A in an effort to meet the required minimum capital base of N25 billion during the consolidation of banks in 2004 and 2005, which included M&A.

According to him, mergers and acquisitions are the most popular corporate strategy for expanding into new markets and geographical areas, acquiring management talent, and allocating cash. There are several reasons why mergers and acquisitions take place.

The frequently mentioned causes are synergy, agency costs brought on by acquirer managers who act in their own best interests, target management discipline, and managerial timing of light market value.

According to Boot (2003), the current wave of mergers and acquisitions can be explained by the first-mover advantage, strategic advantage of market power, and associated deep pockets. The broad scope of many players in the industry also requires that mergers and acquisitions in the banking industry are intended to achieve economies of scale and scope.

This is due to the size’s growth. The system’s effectiveness also rises. Additionally, mergers aid in product diversification, which lowers risk.

The economic justification for mergers and acquisitions is based on the idea that an advantage can be gained by lowering costs, reducing earnings volatility, and boosting market dominance as well as economies of size and scope.

Pilot and Santomero (1996) contend that by eliminating duplicate facilities, major businesses can become more efficient, which can dramatically lower operating costs as a result of merger and acquisition activity. Larger businesses have more influence over the market when setting prices and making profits.

Activities involving mergers and acquisitions have received a lot of attention in academic studies. One area of study examines whether merger and acquisition can increase or decrease shareholder value, and earlier research has used event study technique to look at how the market responded to bank merger and acquisition.

There is a glaring dichotomy in the literature on the value of bank merger and acquisition. According to empirical data, merger activity generally does not result in a statistically significant increase in value or performance. Mergers nonetheless persist (Held and Behri, 2008).

The goal of this study is to critically analyse mergers and acquisitions in the Nigerian banking industry and provide some necessary therapy to ensure the best possible success in mergers and acquisitions.

However, some banks in Nigeria are still dealing with some of the issues that caused the 2004 and 2005 banks consolidation through merger and acquisition from a capital base of N2 to N25 billion.

Although the Nigerian banking sector has undergone a series of comprehensive financial reforms over the past three years, Mukherjee and Beledi (2012) concurred that these changes contain fundamental uncertainty.

However, Hilton Etakoh notes that as time passes and the dust settles, most banks appear to have become stronger than they were before the storm.

Little did Nigerians know that the exercise was just the start of a wave of reforms that would change the face of banking in Nigeria for many years to come when Sanusi Lamido Sanusi,

Governor of the Central Bank of Nigeria, announced the results of a “stress test” (and it) conducted on the 24 banks in the country in which 8 banks were declared technically insolvent and their CEOs were fired.

Major flaws in corporate governance, stock market manipulation, and careless leadership in several banks were revealed as a result of a joint investigation by officials from the Central Bank of Nigeria (CBN) and Nigeria Deposit Insurance Corporation (NDIC) into the books of the various banks.

Eight banks, including Oceanic Bank, Intercontinental Banks, Union Bank, Afri Bank, Fin Bank, Bank PHB, Spring Bank, and Equatorial Trust Bank, were identified as technically insolvent, chronically liquid, and allegedly responsible for the depletion of their shareholders’ funds.

The CBN invested N620 billion as loans into these ailing banks in an effort to improve their liquidity condition. The swift sacking, arrest, and regulatory prosecution of the CEOs of the impacted banks, however, was the most offensive aspect of the unfolding story.

Sanusi then appointed an interim management team for each assigned the responsibility of guiding the banks away from troubled waters and into a peaceful harbour. Sanusi emphasised that the goal of the intervention was to stabilise the struggling banks rather than to liquidate them.

Three of the eight banks that were saved have subsequently been nationalised and placed under the control of the Nigerian assets management corporation (AMCON), which will monitor their recovery, growth, and stability before selling them to qualified buyers in the following two to three years.

Following a required recapitalization process, consultation with and approval from the relevant shareholders, a number of merger and acquisition agreements were enclosed for the other five banks.

Access Bank purchased Intercontinental Bank as part of the merger, Eco Bank purchased Oceanic Bank, and Fin Bank joined First City Monument Bank. While Sterling Bank and Equitorial Trust Bank consolidated into one bank, Capital Alliance purchased states in Union Bank.

Union Bank and Weman Bank both passed the Sanusi stress test, but their positions were still viewed as rather precarious. As a result, two banks were urged to raise their capital in order to move their operational risk to regional banks.

While Unity Bank successfully expanded its capital base by an extra N17.7 billion and recapitalized. However, Weman Bank chose to as it is a regional bank. Overall, there was no money lost throughout the intervention.

The reform is being praised today as the only intervention or bailout in the banking sector where depositors did not lose their deposits.

The only place where a depositor has not lost money is Sanusi, Nigeria. Additionally, Sanusi’s intervention and bailout of the banking sector were carried out in a transparent and firm manner,

which significantly contributed to the restoration of public confidence in the banking sector (Ikpefan and Kazeem, 2013). Nigeria is the only country where the banks are responsible for the cost of the clean-up operation.

According to Forte (2011), on July 30, 2011, Oceanic Bank and ETI signed a transaction implementation agreement pertaining to the acquisition and recapitalization of Oceanic Bank. After the acquisition, EcoBank Nigeria PLC and Oceanic Bank are expected to merge,

creating what is expected to be one of Nigeria’s top financial services institutions with a significant market share across the board and a potent destabilisation network. Additionally, it enables shareholders of Oceanic Bank and ETI to share in the institution’s expansion and the value that will be created as a result.

The transaction will have a number of important advantages for the shareholders of Oceanic Bank and EIT, as well as for the Nigerian financial services industry as a whole. These advantages include:

establishing a top distribution network with more than 600 branches and 1,450 ATMs throughout all of Nigeria’s states.
expanding market share in Nigeria in accordance with EIT’s strategic objectives. The united company will rank top 5 in terms of assets, top 4 in terms of deposits, and top 2 in terms of branch network.

Giving ETI access to Nigeria that more accurately reflects the size of that country’s economy in comparison to other African markets.

A good fit when Oceanic Bank’s robust retail clientele and Eco Bank’s public sector banking platform are combined. Nigeria’s advantage in terms of corporate clients and multinationals.

By exploiting economic for scale in procurement infrastructure and funding expenses, significant efficiencies are anticipated.

Ability to finance more complex transactions and implement group-wide best practises.
Facilitate effective use of Eco Bank Nigeria’s excess capital
ownership stake for Oceanic Bank shareholders in the premier independent pan-African banking organisation, which serves more than 3.4 million clients and has operations in 32 African nations.

Oceanic Bank is very complementary to our business and growth strategy in Nigeria, according to Ekpe (2010). With more than 600 branches and 1,450 ATMs, the transaction establishes the second-largest distribution platform in Nigeria.

by utilising the strong public sector franchise and retail customer base of Oceanic Bank with local and international Eco bank. Corporate clients, we’ll establish a top full-service financial organisation and strengthen Eco Bank’s position as the industry titan in Nigeria.

Ekpe continued, “I am confident that the proposed acquisition will significantly increase shareholder value.” I extend an invitation to Oceanic Bank’s shareholders to take part in the exciting future of the premier independent Pan-African banking company, which currently serves more than 7 million customers across 32 African nations.

The execution of the Acquisition shall be effected by way of a scheme of arrangement, the principal terms of which shall be as follows:

Amcon will make a financial accommodation amount (FAA) investment to reduce Oceanic Bank’s asset value to zero, and in exchange, will receive Oceanic Bank ordinary shares through a private placement.

After injecting the FAA, ETI will purchase Oceanic Bank’s outstanding Ordinary share capital.
100% of Oceanic Bank will be acquired through a combination of new ETI preference shares and new ETI ordinary shares.

After the acquisition, it is anticipated that ETI will merge Oceanic Bank with Eco Bank Nigeria. The united entity after the merger is expected to have a minimum CAR of 16 degrees Celsius.

According to Abdual and Aforinde (2013), the current uptick in bank mergers and acquisitions in Nigeria is garnering a lot of attention, in part due to the increased curiosity about what drives businesses to merge and how mergers and acquisitions impact productivity and efficiency.

According to Sani and Alani (2013), the commercial banking environment in Nigeria has been marked by low capitalization, which has subsequently attracted their financial performance.

Although re-capitalization of Nigerian banks may allay this worry, the exercise’s impact on banks’ performance is still unknown. Whether recapitalization of Nigerian banks has improved their financial performance is the key issue this study attempts to examine.

There are the following competitors in the banking sector, which emphasises the necessity of mergers and acquisitions.
The following are the subjects of the research:

Profitability of the Bank has declined

An increase in bank failures due to inadequate capital.

customer trust has been lost.

The financial sector in Nigeria is underdeveloped.

According to Feyitium (2014), the current upsurge in bank mergers in Nigeria is garnering a lot of attention, in part due to heightened curiosity about what drives companies to consolidate and how mergers increase efficiency.

There are, however, two different perspectives on the motivations driving mergers and acquisitions. The first commonly held belief about mergers, particularly those involving mega firms, is that companies combine merely to increase their size rather than to become more efficient.

This belief is accompanied by the worry that as combining companies gain more market share, individual freedoms, competition, and efficiency may be threatened.

The second commonly held belief about mergers is that companies combine in order to increase both their size and their operational and output efficiency.

It is established that mergers give the banking sector the opportunity to take advantage of new opportunities brought about by changes in the regulatory and technical landscape.

A key motivation for starting this study was the merger and acquisition notion, which is a growing one in the nation.

The relevance and frequency of mergers and acquisitions has increased in the banking sector. The goals of this research include its goals.

To determine whether merger and acquisition will have an impact on the quality of the products and services in the Nigerian banking sector.

To assess the impact of merger and acquisition on the Nigerian commercial bank’s profitability.

To assess the degree to which merger and acquisition impacted Nigeria’s commercial banks’ market share.

To enhance fit by integrating Eco Bank with the robust retail customer base and public sector banking infrastructure of Oceanic Bank.

Does the profitability of commercial banks suffer as a result of mergers and acquisitions?

Can product and service quality in the Nigerian banking sector be impacted by merger and acquisition?

Would a merger or acquisition influence Nigeria’s commercial banks’ market share?

Does the expansion and survival of banks depend on merger and acquisition activity?

Does the merger and acquisition have anything to do with fusing Oceanic Bank’s robust retail clientele and Eco Bank’s public sector banking platform?


H0: Mergers and acquisitions affect commercial banks’ profitability.
H1: Acquisitions and mergers do not affect the profitability of commercial banks

H0: In the Nigerian banking sector, mergers and acquisitions affect the quality of the products and services.
H1: In the Nigerian banking sector, mergers and acquisitions cannot impact the quality of the goods and services offered.

The paper uses Access Bank Nigeria Plc and Eco Bank transactional Plc as case studies to examine merger and acquisition in the Nigerian banking sector.

The goal of the study is to assess how much merger and acquisition have affected the profitability of commercial banks in Nigeria, to determine whether they have an impact on the quality of the products and services provided by Nigerian banks.

To look at the market share of commercial banks in Nigeria, and to assess whether they have an effect on the survival and growth of banks. Asaba city will be used as a case study in the construction of this study.

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