Mergers and Acquisition: The Solution to the Problem of Ineffective Financial Intermediation in the Nigerian Banking System

Adeyinka Joseph Adewole; Aderemi Daniel Adekanmi; OgwuIdih Emmanuel

Adeyinka Joseph Adewole Department of Banking and Finance,College of Management and Social Sciences,Oduduwa University, Ipetumodu P.M.B 5533, Ile-Ife, Osun State, Nigeria
Aderemi Daniel Adekanmi Department of Accounting,College of Management and Social Sciences, Oduduwa University, Ipetumodu,P.M.B5533, Ile-Ife, Osun State, Nigeria
OgwuIdih Emmanuel Department of Banking and Finance,Faculty of Management Science, Kogi State University, Anyigba, P.M.B 1008 Anyigba, Kogi State, Nigeria

Keywords: Merger, Acquisition, Financial Intermediation, Banking.

Abstract

The paper examined the effect of merger and acquisition on the efficiency of financial intermediation in the Nigerian banking system. Nigerian banking sector needs reforms that will lead to a more efficient stronger right for creditor, stronger accounting standard and practices, and a legal and regulatory framework that facilitates the exchange of information about borrowers. Reforms to improve both the level and the efficiency of financial intermediation in Nigeria banks should high on Nigerian policymakers’ agendas, because of the financial sector importance economic growth. This means that Nigeria must also improve the legal and regulation environment in which its financial institutions operates.The study aimed at evaluating the role of mergers and acquisition on bank liquidity and profitability in the Nigerian banking system. The study also aimed at determining the effects of mergers and acquisitions on capital adequacy of banks in Nigeria. Secondary data were used as a means of data collection. Regression analysis was used to analyse the results of the data collected. It was revealed that the relationship between deposit rate and capitalization in effect of merger and acquisition equation I was statistical significant. Secondly, the relationship between lending rate and capitalization in the effect of merger and acquisition equation II was not statistical significant. The study therefore, recommends that there is need to strengthen the overall financial system within which the banking sector operates. Secondly, subsequent policies are recommended to address firms and macro-economic fundamentals in order to drive down the high wedge between lending and deposit rates to further strengthen the efficiency of financial intermediation in the banking industry.

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