ABSTRACT 

This research studied the Impact of Merge in the Banking Industry. The factor that prompted this study was the decrease in bank profitability, increase in number of bank failures, loss of customers depositors confidence etc. The study measured the extent merger and acquisition had impacted on the profitability of commercial banks in Nigeria, examined the extent to which merger and acquisition affected the market share of commercial banks and also to examined how merger and acquisition had improved customers service in commercial banks. This study adopted the survey research design and this entailed administration of well structured questionnaire drawn from Eco Bank Plc, Asaba. The research made use of the Chi – Square statistical tools. I found that merger and acquisition was adequately significant and had an impact in determining the profitability of commercial banks. And also merger and acquisition affect products and services quality in the Nigerian banking industry on account of this face, it was recommended by the researcher that banks should device means of improving their services as products and services innovation should be the driving force behind successful, goal driven merger and acquisition policy. Also government should monitor, by means of relevant regulatory agencies such as CBN, NDIC, activities of merging banks to ensure efficiency

CHAPTER ONE
INTRODUCTION

Banking sector in Nigerian have undergone series of dramatic changes ranging from distressed banks in the 1990 to failed banks and later exist of these banks (Ogunleye, 2005). The Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) reported that, of the 115 banks in operation in 1997, 47 were in varying states of distress, with an average ration of non – performing assets of around 82 percent. The restricting of distressed banks starts with their being put under joint control through “acquisition – in – trust” by the NDIC and the CBN for eventual sales to private operators.

Potter and Owen (2013) stated that, The banking industry in particular play crucial role in the economic development by mobilizing serving and channeling them for investment especially in the real sectors which increase the quantum of goods and services produce in the economy thus nationals outputs increases and the level of employment improves. The banking industry in Nigeria is able to play the positive role it is functioning efficiently. However, if it is represented inefficient and incapable of providing timely and quality services, the banking system could become a major hindrance to economic growth and development.
This led to divindling  confidence in the banking industry by Nigerians noted that bank failure has been experienced since 1990 during which period one out of every two banks was distressed and in the early 2000’s when one out of every three banks was marginally unsound or totally unsound enumerated the fundamental problems of Nigerian banks, particularly those classified as unsound which include persistent illiquidity, poor assets quality and unprofitable operations and stated the major problem as follow: over – dependence on public sector deposited and neglect of small and medium class saver, weak capital adequacy ratios and shareholder fund that had been completely eroded by operating losses; gross insider abuses, resulting in huge non-performing insider related credits, weak corporate governance and risk management practice.
(Furlong, 2006) The failure of banks in the 1990’s and early 2000’s made the former governor of Central Bank of Nigeria to announce of July 6, 2004 that the minimum capital requirement base of bank in the country would be raised from N25 billion. The new policy which required banks to comply with the directly by end of December 2005 was aimed at significantly strengthening the operating environment of banks to perform their intermediation role effectively and efficiently. The new capitalization level for banks was to foster consolidation of the banking industry through mergers and acquisition (M and A) maintain that banks in Nigeria explored the option of mergers and acquisition in an attempt to meet the capital base of N25 billion argue that Nigerian bank adopted different strategies to achieved the stipulated minimum capital base of 25 billion during the consolidation of bank in 2004 and 2005 which include mergers and acquisition. He further opines that mergers and acquisition represents the most widely used corporate strategy to penetrate into new markets and new geographic regions, gain management expertise and knowledge or allocate capital. The question why mergers and acquisition occur has multiple answers.
The often discussed reasons are synergy, agency costs due to self – serving acquirer managers, discipline of target management and managerial timing of light market valuation.
Boot (2003), first – mover advantage and strategic advantage of market power and associated deep pockets way explain the current mergers and acquisition wave and the broad scope of many of the players in the industry also need that mergers and acquisition in the banking industry are aimed to achieving economics of scale and scope. This is because as the size, increases. The efficiency of the system also increases. Mergers also help in the diversifications of products which help to reduce risk as well. The economic rationale of mergers and acquisition is based on the belief that the advantage can be obtained through reduction of expenses and earning volatility and the increase of the market power and economic of scale and scope.
Pilot and Santomero (1996) argue that, mergers and acquisition activities can significantly reduce operating costs from the fact that large firms can be more efficient it redundant facilities are eliminated. Firm with larges size can increase market power in determining higher price or generating profit. Mergers and acquisition activities have drawn much attention in academic research. One stream of research investigates whether merger and acquisition can create or destroy value of shareholders and prior studies apply event study methodology to examine the market reaction around Bank merger and acquisition.
The literature on the value of bank merger and acquisition presents a clear paradox. Empirical evidence indicates that on average there is no statistical significant gain in value or performance from merger activity. Yet mergers continue (Held and Behri, 2008). However, some banks in Nigeria are still facing some of the problems that led to the 2004 and 2005 banks consolidation through merger and acquisition from a capital base of N2 to N25 billion therefore, the objective of this study is to critically analysis the mergers and acquisition in the Nigeria Banking industry and offers some required therapy to ensure optimal success in mergers and acquisitions.

Mukherjee and Beledi (2012) Agreed that although the  banking industry in Nigeria has the last three year under gone successive wide sweeping financial reforms that store very foundation uncertainty. But as the dust gradually settles, most banks seem to have emerged stronger than they were before the storm, Hilton Etakoh reports.
When in July 2009, Sanusi Lamido Sanusi, Governor of the Central Bank of Nigeria announced the result of a “stress test” (and it) conducted on the 24 banks in the country in what 8 banks were declared technically insolvent and their CEOs dismissed, little did Nigerians know that the exercise was just the beginning of a wave of reforms that would change the face of banking in Nigeria for many years to come. A joint term of officials from the Central Bank of Nigeria (CBN) and Nigeria Deposit insurance Corporation (NDIC) had subjected the books of the different banks to string it scruiting that exposed major weaknesses in corporate governance, stock markets manipulation and reckless leading in several banks.
Eight banks including Oceanic Bank, Intercontinental Banks, Union Bank, Afri Bank, Fin Bank, Bank PHB, Spring Bank and Equatorial Trust Bank, were declared technically insolvent, chronically liquid and said to have eroded their shareholder’s fund. In a bid to resolve these troubled banks the CBN injected N620 billion as loans into them to enhance their liquidity status. However, the most infringing part of the unfolded scenario was the immediate dismissal arrest and regulate trial of CEOs of the affected banks.
Sanusi went on to appoint an interim management team for each given a mandate to steer the banks out of trouble water to tranquil harbor. Thus intervention, Sanusi explained was aimed at stabilizing the troubled banks rather them liquidating them.
Three of the eight rescured banks have since been nationalized and placed under the management of assets management company of Nigeria (AMCON) that would oversee their recovery, growth and stability, and there after sell them to suitable investors within the next 2 to 3 years. The other five banks, after a compulsory recapitalization exercise, and the consultation and agreement with the respective shareholders a number of merger and acquisition deals were enclosed. The deal saw Access Bank acquired Intercontinental Bank, Eco Bank acquired Oceanic Bank and Fin Bank because a part of First City Monument Bank. Capital Alliance bought states in Union Bank while sterling Bank and Equitorial Trust Bank merged into a single banks.
Although Weman Bank and Union Bank both passed the Sanusi stress test their position were however considered a bit fragile. Consequently two banks were asked to recapitalize to march the level of their operation of risk being reduce to regional banks. While unity Bank successfully recapitalized and raised its capital base by additional N17.7 billion. Weman Bank however, opted to because a regional bank. In all, the intervention played out without any loss of fund. Today the reform is being hailed as the only banking sectors intervention or bailout where depositors did not lose their deposits.
Sanusi, Nigeria is the only country where no depositor has lost money. Nigeria is also the only country where the banks are responsible for the cost of the clean up exercise “Moreover, the transparent and firm manner in which Sanusi carried out his banking sector intervention and bailout has gone a long way in restoring confidence in the banking section (Ikpefan and Kazeem, 2013).

1.3     MERGER AND ACQUISITION ACTIVITIES OF ECOBANK PLC AND OCEANIC BANK PLC. 
Forte (2011) highlighted that on 30th July 2011, Oceanic Bank and ETI signed a transaction Implementation Agreement in relation to the Acquisition and recapitalization of relation to the Acquisition and recapitalization of Oceanic Bank. It is envisaged that after the Acquisition ETI will merge Oceanic Bank with EcoBank Nigeria PLC “Eco bank Nigeria following the intended merger of Oceanic Bank and Eco bank create a leading financial service institution in Nigeria with strong market share in all metrics and powerful destruction network. Further, it allows both Oceanic Bank and ETI shareholders to participate in the enlarge institution and the value created that will result.
The acquisition will result in a number of key benefit for the shareholders of both EIT and Oceanic Bank, as well as for Nigeria financial services in general. These benefits includes:

Ekpe (2010) observed that, Oceanic Bank is highly complementary with our business and growth strategy in Nigeria. The transaction create the second largest distribution platform in Nigeria with over 600 branches and 1,450 ATMs. By consuming Oceanic Bank’s retail customers base and strong public sectors franchise with Eco bank multinational and local. Corporate clients, we will create a leading full service financial institution and consolidate Eco bank’s position as a market leader in Nigeria “Mr. Ekpe, further remained; I am confident that proposed acquisition will create significant share holder value. I invite the shareholders of Oceanic Bank to participate in the exciting future of the leading independent Pan-Africa banking group with a combined total of over 7-4 million customers and a presence 32 African Countries.
The Acquisition will be executed through scheme of arrangement, the essential details of which are as follows:

1.4      THE STATEMENT OF THE PROBLEM.
Abdual and Aforinde (2013) noted that, the recent outbreak of bank mergers and acquisition in Nigeria is attracting much attention, partly because of heightened interest in what motivates firms to merger and how merger and acquisition affects performance of efficiency.
Sani and Alani (2013) defined that, The scenario of commercial banking in Nigeria has been characterized by low capitalization which consequently attracted their financial performance.
Re-capitalization of Nigeria banks may address this concern the effect of the exercise on banks performance remains an empirical one. The main problem addressed in this study is whether recapitalization of Nigeria banks has improved their financial performance.
The following challengers exist in the banking industry which underscores the need for merger and acquisition.
The research work is conducted on these they are :

Feyitium (2014) described that, the recent outbreak of bank mergers in Nigeria is attracting much attention, partly because of heightened interest in what motivates firms to merge and how merger attract efficiency. However, there are after two distinct views to the rationale behind merger and acquisition. The first held view of mergers, especially those involving mega firms, is that firms are merging just to get bigger and not be more efficient Accompanying that notion is the fear those as merging firms grab greater market share individual free – dows, competition and efficiency are threatened because bigger is perceived as greater concentration of power the second view holds that firms merge not just to get bigger but also to be more efficient in operations and outputs. It is clain that mergers enable the banking industry to takes advantage of new opportunities created by changes in the technological and regulatory environment.
Merger and Acquisition as growing concept in the country would and a major reason on embarking on this study.
1.5  THE OBJECTIVES OF THE STUDY
In the banking industry, merging, acquisition has grown in importance and frequency. The objectives of this research include in objectives.

1.7    THE RESEARCH HYPOTHESES

H1: Merger and Acquisition does not have impact on profitability on commercial banks

H1: Merger and Acquisition can not affect products and services quality in Nigeria banking industry.

1.8  THE SCOPE OF THE STUDY
The study focus on merger and acquisition in the Nigeria banking industry using Access Bank Nigeria Plc and Eco Bank transactional Plc as case study. The objective of the research is to measure the extent merger and acquisition has impacted on profitability to commercial bank in Nigeria and to establish it whether merger and acquisition is to affect the product and service quality in Nigeria banking and to examine the market share of commercial bank in Nigeria and to determine if merger and acquisition has an impact on bank’s growth and survival. This study going to be constructed using Asaba metropolis as a case study.