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PROJECT TOPIC: EFFECT OF MERGER AND ACQUISITION OF THE PERFORMANCE OF NIGERIAN BANK.

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CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

The banking sector plays a pivotal role in any economy worldwide. They play a fundamental role in the financial intermediation process in the economy through the enhancement of a link between the surplus and deficit unit in the economy. In line with this submission Onikoyi (2012) assert that the economies of all market-oriented nations depend on the efficient operation of complex and delicately balance systems of money and credit. Banks are an indispensable element in these systems. They provide the bulk of the money supply as well as the primary means of facilitating the flow of credit. Consequently, it is submitted that the economic well being of a nation is a function of advancement and development of her banking industry (Obadan, 1997).

According to Oloye and Osuma (2015) the Central Bank of Nigeria (CBN) as a regulatory body came up with the recapitalization and consolidation exercise in the banking industry requesting banks to increase their paid-up capital through public offers or corporate restructuring exercise (merger and acquisition) with the view of eradicating the expansion bottlenecks, volatility between the deposit and lending rates and some other constraints faced by the banks. This made some of the commercial banks to consider Merger and Acquisition as a survival strategy. This reform as stipulated by the apex monetary authority in 2004 mandated Nigerian commercial banks to beef up their minimum capital base from N2billion to N25billion on or before 31st December 2005, with the major objective of creating a sound and a more secure banking system which will strengthen our financial system that depositors can trust. This will enhance the operational capital base of the Nigerian banks.


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