Abstract:

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 to determine if there is a significant difference in the performance of the sector between the two periods. Performance assessment indicators analyzed in the study are ratio of non-performing loans to total credit (asset quality), return on assets (earnings/profitability), capital adequacy ratio (long-term liquidity) liquidity ratio (short-term liquidity), ratio of bank loans and advances to GDP (credit delivery) and ratio of bank assets to GDP (bank size). Levene’s independent sample t-test was used to determine the extent to which the performances of these indicators differ 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 ratio of loans and advances to GDP between the pre- and post- consolidation periods. 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 installation 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.