A CRITICAL ASSESSMENT OF THE SURVIVAL STRATEGIES OF DEPOSIT MONEY BANKS IN A DEPRESSED ECONOMY WITH SPECIAL REFERENCE TO THE FIRST BANK OF NIGERIA PLC



 DEPARTMENT OF BANKING AND FINANCE
FACULTY OF MANAGEMENT AND SOCIAL SCIENCES

ABSTRACT
Banking is in the midst of change that has arisen due to economic depression. As government seek to improve economic efficiency and better allocation of resources to solve the problem of economic depression, policy makers are shifting towards openness, competitiveness and market discipline.

In response to the developments, Deposit Money Banks in Nigeria engaged in financial sanitizing, management strengthening, corporate refocusing, Business Process Reengineering (BPR), mergers and acquisitions in order to survive the depressed economy. This whole process is called survival strategies through corporate restructurings.
The writer made efforts to discuss issues, facts and environmental factors surrounding the wave of deposit money banks’ survival in a depressed economy like Nigeria.
The impact of this research in banks was gleaned from five performance indicators namely total assets, total deposits, loans and advances, profit before tax and shareholders’ funds, of First Bank of Nigeria Plc. The research looked at the position of these indicators before and after the sanitizing exercise undertaken by the banks for survival and also, its impact on the entire banking system bearing in mind the effect of globalization on the financial market in particular and the economy at large.
Chapter four shows the presentation and analysis of First Bank’s financial statement with the use of chart, tables, bar chart and graph.
Chapter five summarizes all that was discussed from chapter one to four and gave suggestions on how deposit money banks can survive in a depressed economy.
Finally, this researcher leaves this work open to constructive criticisms and expects future scholars to delve into further research and improve on this work.

TABLE OF CONTENTS

Title Page       -           -           -           -           -           -           -           i          
Approval Page          -           -           -           -           -           -           ii
Certification Page    -           -           -           -           -           -           iii
Dedication     -           -           -           -           -           -           -           iv
Acknowledgement   -           -           -           -           -           v
Abstract         -           -           -           -           -           -           -           vii
Table of Contents     -           -           -           -           -           -           viii
CHAPTER ONE:    INTRODUCTION
1.1       Background of the Study    -           -           -           -           1
1.2       Statement of the Problem    -           -           -           -           9
1.3       Objectives of the Study       -           -           -           -        11
1.4       Research Questions -           -           -           -           12
1.5       Scope of the Study   -           -           -           -           -           12
1.6       Significance of the Study    -           -           -           -           13
1.7       Limitations of the Study     -           -           -           -           14
1.8       Definition of Terms             -           -           -           -           15
CHAPTER TWO:
2.0             Review of Related Literature         -           -           -           1
2.1       Issues in Bank Survival       -           -           -           -           17
2.2       An Overview of the Operating Environment for
            Nigerian Deposit Money Banks     -           -           -           19
2.2.1       The Macro-Economic Environment          -           -           20
2.2.2       Industry Environment         -           -           -           -           29
2.2.3       The Regulatory Environment/Legal Framework -          32
2.3             The Business Process Re-Engineering (BPR) Option -      -           35
2.3.1       Origin and Meaning of the BPR Concept             -           -           -              35
2.3.2       Fundamental Breakthrough Required for Reengineering
Services in Banks     -           -           -           -           -           -           -         -     36
2.3.3       Key and Methodology for Carrying Out a BPR Project in Banks  42
2.3.4       The Role of BPR in the Survival and Sanitizing of the Nigerian
Deposit Money Banks         -           -           -           -           -           -             47
2.3.5       Positive Effects of BPR To the Banking Sector   -           -           50
2.4             The Merger and Acquisition Option         -           -           -           -           52
2.4.1       Meaning of the Concept Merger and Acquisition           -           -           52
2.4.2       Legal Issues in Merger and Acquisition   -           -           -           55
2.5             Synergy: An Efficiency Indicator in Bank Sanitizing -  -           56
2.6             Nature of Deposit Money Bank in Nigeria          -           -           -           59
2.7             A Historical Overview of First Bank of Nigeria Plc       -           -           60
2.8             Depressed Economy            -           -           -           -           -           -           62
2.8.1       Causes of Economic Depression - -           -           -           -           63
CHAPTER THREE:
3.0             Research Methodology -     -           -           -           -           -           -           65
3.1       Research Method     -           -           -           -           -           -           -           65
3.2       Determination of Population size of the Study   -           -           65
3.3       Determination of Sample size        -           -           -           -           -           67
3.4       Method of Data Collection             -           -           -           -           -           68
3.5       Method of Data Analysis/Interpretations -           -           -           69
CHAPTER FOUR
4.0             Data Presentation and Analysis-   -           -         -         -  71
4.1       Financial Statement of First Bank            
Plc for the Month ended 31st March        -           -           -        -         71
4.2      Analysis of Total Assets      -           -           -           -           -        -          73
4.3       Analysis of Total Deposits-            -           -           -           -        -          77
4.4       Analysis of Loans and Advances- -           -           -        -         80
4.5       Analysis of Profit Before Tax        -          -         -          -        -        86
4.6       Analysis of Shareholders’ Funds- -           -              -        -       89
CHAPTER FIVE
5.0             Summary, Conclusion and Recommendation-          -         -      93
5.1       Summary -     -           -           -           -           -           -           -               -     93
5.1.1   Total Assets  -           -           -           -           -           -           -                -    93
5.1.2   Total Deposits          -           -           -           -           -           -                -    93
5.1.3   Loans and Advances           -           -           -           -           -                 -   94
5.1.4   Profit Before Tax (PBT)      -           -           -           -           -                 -   95
5.1.5   Shareholders’ Funds            -           -           -           -           -                 -   95
5.2       Conclusion    -           -           -           -           -           -           -            -     96
5.3       Recommendation    -            -           -           -           -           -           -           96
          
           Bibliography -         -        -         -        -         -         -         -         99

CHAPTER ONE
INTRODUCTION
1.1       BACKGROUND OF THE STUDY
Nigerian economy is faced with national and global economic challenges and as such, the financial institutions, especially the banking sector has an option of sanitizing and restructuring its operational processes in order to survive the depressed economy, as well as embarking on a consolidation exercise which would have some wider structural effects on the industry and on the economy as a whole.                          
Basically, banking is a service industry operated by human beings for the benefit of the general public while making returns to the shareholders.  As such, it is natural that the services provided thereof by the industry cannot be 100% efficient; however, there is always a room for improvement.  It is on this statement that the index of our further discussion on this study is based.
The banking sector in the third world economies has been grossly under managed when compared with their counterparts in the developed countries of the world.  This has made it imperative for Nigerian banks to sanitize and restructure their operational processes so as to be in line with the global trends, and to survive the depressed economy.
Before the introduction of Structural Adjustment Programme (SAP) in 1986, the banking sector was characterized by few banks.   The operators of these banks had almost total control of the business of banking as customers had to look for their services which most of the times were of poor quality.  The managers, because of the pressure to provide banking services, had little time to market their bank services or design new products to improve their customers’ service and at the same time, they received changes based on the approved tariff.  Competition was minimal and customers could spend long hours trying to obtain service in the banking hall due to long queues.
The quality of the bank staff was poor.  They were rude to their customers and most of the time; they felt they were doing a favour to their customers.  As at that time, no Nigerian bank had neither a simple computer nor a network of computers for online banking.  In the area of credit appraisal,  Ezeikpe (1993) observed that they were two conservative in extending credit facilities.  The system was highly under banked while the payment mechanism was filled with imperfection such that locally drawn cheques took more than one week to clear.
However, with the introduction of Structural Adjustment Programme (SAP) and its policy of deregulation and liberalization, some structural reforms were ushered into the banking sector.  By this policy, direct management and rigid controls in banking and security business by the government were de-emphasized for a broad based and private sector driven process.  Laws inhibiting competition were removed to ensure that banks are reasonably sound, competitive and efficient.
The traditional reforms were aimed towards achieving the following objectives:
1.         A strategy for competition.
2.         A sound organizational structure and effective management to support the strategy.
3.         To ensure management of critical financial and operating risks in banking.
4.         A system for planning, budgeting and measuring performance.
5.         Entrenching a programme for human resource management.
6.         Ensuring a strong and effective internal control.
7.         Putting in place the most appropriate Information Technology (IT) to automate the process.  Without any doubt, this policy was geared towards enabling banks to respond flexibly to monetary conditions and to facilitate an effective mechanism for transmitting the effect of monetary policy to the real sector.
The policy of liberalization ushered in an era of bank proliferation and reduction in professionalism. Investors rushed into banking business with about the same zeal with which they embraced contracts during the oil boom era of the 1970s.  In no distant time, signals of distress started manifesting in the banking sector by way of liquidation.  Some factors were identified as the causes of the distress that besieged the banking system.  These factors included:
1.         Under capitalization which made the capital structure of some of the banks to be inconsistent with their risk asset profile.
2.         No clearly defined lending policies and credit appraisal techniques.
3.         Unprofessionalism in the conduct of bank staff.
4.         High incidence of bad debts and non-performing facilities.
5.         Boardroom squabbles and undue interference of the board in the day-to-day management of the bank.
6.         Poor staff quality which arose due to the absence of retraining, and giving lip service attention to human premium.
7.         Incompetent management.
8.         Conflict of interest and insider abuse.
9.         Policy problem or delay and inadequate institutional arrangement and structures on the part of the regulatory authority before implementing policy changes thereby creating unhealthy and avoidable suspense and uncertainties.
10.       Inadequate prudential regulation and framework for credit classification.
11.       The sudden withdrawal of public sector deposit from the banking system to Central Bank in June, 1989.
12.       The epileptic stabilization securities and their lack of clear guidelines or modalities with respect to timing, mode of computation and amount
            The list is almost unending but one can observe from the above that apart from the last four (4) points which are externally induced stock, the rest are problems that can be controlled with appropriate in-built mechanism of internal control in the individual banks.
In the face of all these problems and uncertainties, the option available for the system to have a better control of these factors is to sanitize the bank internally and externally for survival.  Aderingbe (1997) observed that “for Nigerian banks to remain relevant in the next century with the current incursion of technology and globalization of the world market, they have to learn how to sanitize their operations for survival.”  Also Elumelu (1998: 26-27) observed that “the recent N25 billion recapitalization of Nigerian banks has made banks to go into several arrangements for its continued relevance.  This has resulted into arrangements like mergers, acquisitions, take-overs, re-engineering etc.”
The issue of bank survival through restructuring and sanitizing does not exist only as a failure resolution strategy.   However, it can be adopted in solving so many operational problems of corporate organizations.  The financial service industry has applied it in many operational problems.  In acknowledging the strategies and its impacts in the banking sector, a world bank report in the United States of America shows that for the year 1992-’96, the banking industry accounted for 13% of mergers, acquisitions and other survival activities by number of institutions and 12% by dollar amount and ranked first among other industries’ survival through sanitizing activities.  However, certain global factors have been identified as haven contributed to the result in an upward trend in survival and sanitizing activities; these included:
1.         The dismantling of regulatory barriers and regional economic groupings which jerked up the pace of globalization.
2.         The recent advancement Information Technology (IT) and the new rate of interest in banking.
3.         Continued institutionalization of the market participants as opposed to individualization.
4.         The need for an enhanced payment mechanism.
5.         The increase competition in the financial services delivery. The survival strategies and the impact of sanitizing the Nigerian banks have resulted in emergence of strong new local banks fully 100% owned foreign banks or both local and foreign participation in owners such as Citibank and NBM, Stanbic Merchant bank within the limited availability of component manpower.
Mike Hunder (1997:12) in his crusade for re-engineering, restructuring, sanitizing and survival, opined that, “as competition among banks become keener in the face of declining market margins, banks’ management have to manage the hard way of re-engineering.”
As the banks are devising ways of improving efficiency and ensuring the optimization of the available resources, policy makers and regulatory authorities are moving towards openness, competiveness, and at the same time ensuring market discipline.  This is in tandem with the trend in the banking sector globally.  Ahmed (2000:33) described this development as a magic one which caused quite a substantial number of Nigerian banks to be sick while some became healthier.  In his view, he contended that growth in the banking sector should be transmitted easily into growth of the real sector.  But as banks continued to record impressive growth in all economics, indices show a declining margin of economic growth.  This makes one begin to wonder where the impacts of the impressive performance of the banks as reported in the financial reports are being felt.  Even the NDIC which is established to insure the deposit liabilities of licensed banks has liquidated some distressed banks.  The action, Ezeikpe (1993: 36-38) commended while arguing that some distressed banks should be liquidated as a way of survival for the banking system.
It is on this argument that this work lies to assess the survival strategies of deposit money banks in a critically depressed economy with special reference to the First Bank of Nigeria Plc, paying attention to its performance, growth and stability.
1.2       STATEMENT OF THE PROBLEM
Evidence has shown that the banking business is undergoing several transformations. With the increased deregulation and liberalization of the business, their structural changes are unavoidable; hence, the current wave of restructuring in the sector is to respond adequately to the fast changing and increasingly competitive business in order to survive.   Banks that are unable to restructure in line with the global revolution in the industry should be ready to go down the drain in the process and be liquidated.
            Between 1991 and 1997, a total of 31 Nigeria banks have been liquidated by the NDIC due to their protracted problem of distress, but some of the casualties would have been averted if appropriate restructuring strategies were implemented.
            In this era of customers’ sophistication and advancement in information technology, bank management should learn to be proactive and more efficient in product/service delivery.  They should continually review their operational strategy in readiness for the on-going global challenges, more so, as customers are becoming aware of their environment and ready to move their funds to where their demands would be adequately met while yearning for more personalized services.
            In consideration of the above challenges, one may ask, how effective are the various survival/options and sanitizing strategies adopted by banks in the face of economic depression?  Has information technology been given adequate attention?  Do bank mergers achieve the desired synergy?  Has survival strategy through restructuring led to an improved bank performance?  How far could the result of the exercise be sustained without abandoning the strategy?
            These stated problems together with the research questions below are what the researcher tries to encapsulate in the research topic with a view to providing their answers in the course of this research.


1.3       OBJECTIVES OF THE STUDY
            In dealing with the above stated problems, the study seeks to achieve the following objectives;
1.      To find out if the volume of assets of banks improved after survival strategies were employed through sanitizing and restructuring.
2.      To find out how survival strategies adopted by the banks have affected deposit mobilizations.
3.      To ascertain the extent the depositors’ confidences have been restored in the survival strategies employed by banks in a depressed economy.
4.      To examine how survival strategies adopted by banks impacted on the shareholders’ funds of the affected banks.
5.      To find out if the volume of loans and advances improved after adopting the survival strategies through sanitizing and restructuring.
6.      To know whether profitability of banks improved as a result of survival strategies adopted by banks after sanitization and restructuring.

1.4       RESEARCH QUESTIONS
In trying to make a critical analysis of survival strategies for deposit money banks through sanitization of the banking industry for growth and stability, the following questions will be very important as the researcher tries to provide answers to those mind bugging questions which are:
1.                  Has there been any improvement in the bank’s assets as a result of the restructuring?
2.                  Has there been increase in deposit mobilization?
3.                  To what extent has depositors’ confidence been restored?
4.                  Has there been increase in the size of loans and advances?
5.                  How has the strategy impacted on the bank’s profitability?
6.                  What impact has the strategy made on the shareholders’ funds?
1.5             SCOPE OF THE STUDY
This study attempts to study survival strategies through corporate restructuring and sanitizing as they are applied in enhancing the performance of deposit money banks in a depressed economy. The study covers the activities and impacts of sanitizing in Nigerian banks using First Bank of Nigeria Plc as a case study. Acquisitions and business reengineering are discussed.
The period chosen is from 2003 – 2008 in First Bank Plc of the Nigerian Banking Sector. This is to enable the researcher study the trends for about three years before sanitizing and three years after sanitizing. This is with the understanding that the time frame will only be fair and balance for comprising their performance. It is also extended to 2008 to ensure that the information and data used are timely, up to date and accurate enough to represent the current position of the bank under study.
1.6             SIGNIFICANCE OF THE STUDY
Although much have been written about banks’ survival in a depressed economy and sanitizing of banks in recent times, much of these literatures approached the issue only as a failure resolution option. Though banks’ survival through sanitization can sometimes is appropriate approach for failure resolution, it can also be embarked upon to enhance performance in good performing banks.
In view of the above reason, this study does not limit its scope to the distressed banks or resolution of distress. A good performer may also be required to sanitize for survival of its business process or reposition for further challenges in the market or to respond to certain global developments. In this regard, bank directors, corporate bodies and management that want to embark on banks’ survival strategies and corporate refocusing to achieve better results will find this as an interesting piece. For academicians, it will serve the purpose of arousing deep thoughts and genuine interest on the subject matter for further research.
Consequently, upon completion, this work will:
1.      Detail out the various forms of survival and sanitizing strategies that are desirable for banks using the First Bank as a case in point.
2.      Recommend the approach or methodology to be followed in sanitizing and reengineering the business process in banks for survival in a depressed economy.
3.      Determine if survival strategies and sanitizing have restored confidence among Nigerian banking public.
1.7             LIMITATIONS OF THE STUDY
The major constraints encountered in this research work are:
The obvious attempt by banks to classify most of their information that is necessary for the completion of this work due to certain management policies.
The escalating cost of transport and financial impediments which made the cost of carrying out the research to be expensive.
The inability to collect the annual reports of many banks for various years was a slow down to this research as the staff refused to disclose the figures for analysis which necessitated the use of First Bank Plc as a case study.
On the whole, academic stress and time factor also added to the problems but the researcher made the best efforts in optimizing the available resources and information without allowing the limitations to make the researcher lose sight of the quality of the final output. In essence, these limitations do not impinge on the validity of this work.
1.8             DEFINITION OF TERMS
SURVIVAL: The state of continuing to live or exist often in spite of difficulty or danger.
STRATEGY: A plan designed for a particular purpose. The process of planning something or carrying out a plan in a skillful way.
DEPOSIT MONEY BANKS: The resident depository corporations and quasi-corporations which have many liabilities in the form of deposits payable on demand, transferable by cheque or otherwise usable for making payments.
DEPRESSION: The state of being depressed. It is a period when there is little economic activity, and many people are poor or without jobs.
ECONOMY: The relationship between production, trade and the supply of money in a particular country or region. It is the system of trade and industry by which the wealth of a country is made and used.
DEREGULATION: It is a way to free a trade, business activity etc from certain rules and controls.
LIBERALIZATION: This is a way to free somebody or something from political, religious, legal or moral restrictions.
LOAN AND ADVANCE: Loan is a sum of money which is borrowed, often from a bank, and has to be paid back usually together with an additional amount of money known as interest, while Advance is bank lending which may be via term loan, overdraft, or bill discounting.

CHAPTER TWO
2.0      REVIEW OF RELATED LITERATURE
2.1       ISSUES IN BANK SURVIVAL
In different economic periods, banks and businesses may see the need to sanitize their operations for survival and growth in response to the uncertain macro-economic environment. Mergers, take-overs, re-engineering and corporate-turn-around issues have become the central public and corporate policy issues in Nigeria banking.
Corporate-turn-around issues come into play when the top management team of a bank undertakes restoration of an ailing corporate business portfolio to good health, or to improve on the already performing portfolio or repositioning and redefinition of the business focus for future market changes. The chief executive of the management team and every staff in the firm must resolve to make a firm resolution, that is, a firm’s commitment to re-evaluation the current belief in the light of new evidence. The management team should be courageous to carry on the project to conclusion, adopting all the recommended strategies in the face of surmounting challenges. Management actions and decisions should be such that will optimize the available resources. That is why Drucker (1994:26) sees managerial action as “having synergistic effect in which they should create a productive entry that turns out more than it receives as input”.
The first task here is always the diagnosis of the underlying reasons for poor corporate performance, and curative strategies will immediately be large losses in some units like poor and non-performing portfolio, unattractive and improper or in some cases, non existing products, ineffective products/services system etc. These factors pull together with unfriendly operative environment to result in poor performance of the organization.
Depending on the roots and urgency of any problem, some of the following approaches can be used either singly or combined to achieve sanitizing objectives of banks; according to Drucker.
1.                  Focus mainly on restoring profitability in the money leasing units.
2.                  Implement harvest /divest strategies in the poorly performing units and allocate money and resources to expansion of better performing units.
3.                  Institute across the board, economies in all business units.
4.                  Revamp the composition of the business portfolio by selling off weak businesses and replacing them with new acquisition in attractive investments (investment strategy).
5.                  Replace key management personnel at the corporate level.
6.                  Launch profit improvement product in all units.
7.                  Go into a combination (merger and take over) arrangement.
In this chapter, the researcher seeks to review the related literature to seek out what is involved in banks’ survival through sanitizing, how and to what extent they are done. Hence, the literature review is to go into relevant works to find out what and how banks achieve economic survival and growth through sanitizing strategies. To this end, the relevant and related works of various authors in the subject matter shall be reviewed. However, the operating environment for banks in Nigeria shall first be discussed.
2.2       AN OVERVIEW OF THE OPERATING ENVIRONMENT FOR NIGERIAN DEPOSIT MONEY BANKS
            An environment can be defined as those factors that are largely or totally outside the management’s control. It refers to certain uncontrollable variables that impact on an organization and therefore, must be taken into consideration in management decision making. The nature, quality and type of decision in a business organization is directed towards adapting to the environment.
Nigeria banks operate in a dynamic environment and must therefore adapt to survive, because the environment creates opportunities and imposes constraints on their activities. The continual profitability and the survival of banks is therefore dependent to a large extent on management’s ingenuity in making decision that will enhance the earnings of a bank.
However, for the purpose of clarity, this study would review operating environment for banks from three perspectives. They include.
1.                  The macro-economic environment
2.                  The institutional/industry environment
3.                  The regulatory/supervisory environment/legal framework
2.2.1       THE MACRO ECONOMIC ENVIRONMENT
The existence of a stable undistorted macro economic environment is the foundation of strategy for economic growth, better policy formulation and implementation, which means faster growth and therefore, shows the need to maintain good macro economic policies as measured by low inflation, prudent fiscal stance and realistic exchange rate. In its widest sense, macro economic environment refers to those domestic policies as well as the outside policies (international macro-economic environment) which affect the performance of domestic economy.
Ajayi (2005: 26) summarizes what constitutes a conducive macro-economic environment as :
1.                  A realistic exchange rate
2.                  Balanced budget and a small ratio of government consumption to GDP
3.                  Open trade policy as opposed to inward looking import substitute strategy and tariff regimes.
4.                  Political Stability and good governance development and adequate investments in human capital.
5.                  Financial Strength.
Evidence from successful economies shows the need to maintain good macro prudent fiscal stance, realistic exchange rate and absence of parallel exchange rate. Evidence of Middle East “East Asia Miracle” is useful where policies to increase the more accessible to non-traditional savers increased the level of financial savings.
For the purpose of this research, the analysis of the Nigeria macro-economic environment is broken down into four phases.
Period 1                     1960-1965
Period II                     1966 – 1970
Period III                    1971 – 1985
Period IV                   1986 – 2005
PERIOD I     1960 – 1965
This period which was during and after independence was regarded as the one of the high expectations. Although available resources were low, foreign aids were enjoyed in the form of exchange of professional staff, scholarship and grant. The agricultural sector was dominant at that time in terms of number of sources of government revenue and GDP contribution. The monetary and fiscal policies were geared towards promoting industrialization and development through credit ease and tax holidays. The country was able to lay the necessary foundation in areas of infrastructures and education. Banking sectors was then characterized by few banks operating in the system. The Central Bank of Nigeria was just then established and there were strict regulations. Foreign owned banks operated with weak capital base and were not sound in staff and management.


PERIOD II    1966 – 1970
Two major events that had significant impact on the macro economic environment and which still haunt the country’s operating environment for business till date happened this period. The first event was the January 1966 military coup d’etal amidst blood bath. The second event was the out break of civil war which created disruption and destruction of already existing infrastructures. The period witnessed the merging of the two then existing merchant banks into a single institution in July 1969.
PERIOD III  1971 – 1985
After the civil war, the nation embarked upon a reconstruction programme. Incidentally, the discovery of oil resources in Nigeria and increase in oil price changed the direction of the nation’s economy.  Crude oil became the chief export earner and therefore served as the main source of government revenue. The government then had the financial muscles to participate in economic activities and it became prominent in almost all sectors of the economy. At this time, there was a dearth in entrepreneurship which added impetus to the government’s participation in economic activities. The oil boom changed the pattern of production, investment and consumption, making the economy to depend more on imports. This was reflected in the third development plan document that “the importance of mining and quarrying sector in Nigeria has substantially increased in recent years”. FGN (1980).
Thus, the oil has become the main engine of growth of the Nigerian economy. Due to enhanced level of experience and unprecedented growth, the boom in economic activities resulted in increase in the number of banking institution in Nigeria to finance the huge imports and merchandizing activities. Subsequently, the number of deposit money banks rose sharply while that of merchant banks rose to twelve by 1985.
The dawn of oil boom altered the macro-economic environment in many ways as:
1.      Illusion was created that finance was no more a constraint in the economy.
2.      The economy shifted from one based on subsistence agriculture to the monetized activities.
3.      The oil boom changed the pattern of production, investment and consumption which resulted in an airport oriented economy.
4.      The massive investment led to change in the structure of wages and prices resulting in growth of inflation from 3.3 percent in 1973 to 33 percent in 1975.
The crash of oil prices in 1978 marked the beginning of the Nigerian financial crises as the future of the oil prices varied inversely with control measures which basically were of three types namely imports, foreign exchange and credit controls. These controls had severe effect on the entire financial sector. The financial sector however witnessed a serious setback due to the reforms or deregulation of banks in Nigeria by the government.
PERIOD IV    1986 – 2005
With the launching of the Structural Adjustment Programme (SAP) in July, 1986, which relied largely on market forces for the efficient allocation of resources contrary to the rigid controls of the previous period, deregulation and liberalization became the policy option. The effects of SAP were generally mixed with both positive and negative results as inflation grew out of control; agricultural production and GDP recorded improved but low growth rates. However, the modest gains in the first two years of implementing the SAP policies were lost after the reflectionary budget of 1988. The balance of payment remained under considerable pressure owing to excessive demand for foreign exchange and over valuation of exchange rate, declining export receipts and increasing external debt burden. Additionally, many banks became distressed by being grossly under capitalized, illiquid and over burden with high ratio of non performing loans.
Looking closely at a distressed bank, three explanations can be offered. First is the over valuation of naira in real terms given the discrepancies, round tripping between official and parallel market became lucrative and many banks came on board to take advantage of the foreign exchange arbitration. Secondly, the volume of accumulated bad debts and non performing facilities due to inappropriate and unclear lending policies. Thirdly, the scarcity of trained professionals relative to the fast growing number of banking institutions. This led to inadequate audit procedures and high incidence of bad debt. There was equally low emphasis that was being paid to human premium.
With persistent unfavourable macro-economic indices, the government suspended the policy of deregulation and introduced the option of guided deregulation in 1995. The policy tried to allow market forces to interplay within tolerable limits, with appropriate level of intervention by the regulatory authorities. The policy aimed towards reversing the upward trends and unfavourable macro-economic indices, curbing the volatility of interest and exchange rates occasioned by deregulation and re-introduction of appropriate regulations to the areas, where market forces had adverse effect while deregulating with caution in order to achieve the full benefits of deregulation with little or no hiccups. It was also seen as an adequate measure for curtailing the persistent fiscal deficits and wasteful extra budgetary expenditure, harmonizing monetary and fiscal policies and ensuring an era of fiscal disciplines.
However, the policy of guided deregulation was dropped in 1998 with the little modifications. The economy was opened up more in readiness to attract more foreign investors while private sector was given the opportunity to play the leading role. The essence of this was that banks would beef up their performances in order to finance the level of investment and capital flows that was expected to move in with the private sector driven regime. This led to the resuscitation and re-engineering of the ailing banks. More banks started shopping for more capital to meet up with the then CBN minimum capital requirement of N500 million.
The 1999 – 2005 periods ushered in a more conducive environment with the democratic government in place. The dual exchange rate was abolished and everybody was expected to source their foreign exchange needs. New and more foreign banks were already in the system. This was expected to usher in more competition in product /service delivery. The CBN autonomy was restored while merchant banks that wished to convert to commercial banks were allowed to apply and licenses for conversion were granted by CBN. This led to the conversion of merchant banks like Intercontinental Merchant Bank, Merchant Bank of Commerce, Manny, Fidelity, Union Merchant Banks and others.
A lot more is needed to be written on the issue of the Nigerian macro-economic environment, but it is an issue that needs a separate paper for more detailed analysis. However, the summary of this is that the country had an environment full of political instability, policy inconsistencies and hiccups, inadequate infrastructure, high level of unemployment, low domestic savings, low capacity utilization and high rate of crime and corrupt practices, hence, the state of macro economic instability. But since the death of late Gen. Sani Abacha in 1998, a lot of policy changes have been made at creation level; and with the democratic government in place, these efforts need to be sustained in future. Also, the recent issue of N25 billion recapitalization base as minimum capital requirement for banks would stabilize the economy.
2.2.2   INDUSTRY ENVIRONMENT
The environment of the banking industry is a component of the institutional environment provided by the financial system which cannot be divorced completely from the macro economic environment. The institutional environment is made up of financial institutions, markets, instruments and other framework under which the transfer of financial resources from the surplus to deficit units of the economy operates. The components of the institutional environment are:
1.                  The Apex Institutions: The Central Bank of Nigeria (CBN), Nigeria Deposit Insurance Corporation (NDIC), National Insurance Commission (NIC) and the Securities and Exchange Commission (SEC).
2.                  The Banking Institutions: Universal Banks, Development Banks, Community Banks and People’s Bank.
3.                  Non-Bank Financial Institutions: Insurance Companies, Finance Homes, Pension Funds, Mortgage Finance Companies, etc.
4.                  The Financial Market: Comprising the money and capital markets, stock exchange, stock brokers, Issuing Houses, Registrars, etc.
To review the industry environment, it is necessary to state that the institutional environment has a direct bearing on the banking sector environment. This paper will only outline the impact of various players (banks) in the industry as a full scale review will tend to make us lose sight of the original topic. Before 1960s, the banking sector was characterized by:
1.                  Entries and exits of many banks due to reasons ranging from capital inadequacy to incompetent management.
2.                  Domination of the sector by foreign banks.
3.                  Branch banking system, conservative lending, urban bank orientation and risk aversion.
From 1960 – 1985, the creation of states resulted in the emergence of states owned banks due to the inability of the foreign owned banks to meet the needs of the new states. The oil boom of the  1970s led to the influx of banks to finance the growing economy. However, the indigenization policy by 1977 changed the ownership structure of the foreign banks. There were lack of innovation and competition among banks as at the period. The period was characterized by arm-chair banking. However, from 1986, the trend changed with the introduction of SAP and its attendant reform. The impact was felt in the banking industry by way of:
1.                  Proliferation of banks.
2.                  The introduction of electronic banking and computerization with the coming on board of new generation banks.
3.                  Globalization of the economy and banking as the operating environment is now seen beyond the locality. There is the de-emphasization of geography.
4.                  Some developments were witnessed in the money and capital markets which exposed banks to more risks or the impact of the global economy.
5.                  Distress syndrome which besieged the sector in the early 1990s.
The changes led to the continual sanitizing and re-engineering of the Nigerian loan, adopting success for strategies rather than a retention management style which permeated banking during the period of financial repression in order to survive the depressed economy.
2.2.3       THE REGULATORY ENVIRONMENT/LEGAL
FRAMEWORK
Throughout the world of business, it is a well known fact that banking sector is the first regulated sector of any economy. The reason for this is not far-fetched. It stems from its critical role which is crucial to the survival of deposit money banks and other financial institutions in a depressed economy. This role consists of collecting deposits from surplus units, safeguarding them and lending them to the deficit segments for investment purposes. In doing this, the banks must also make such funds available to the true owners on demand. For the financial sector particularly banks to be effective in doing this, it has to be regulated to safeguard market failure, ensure social equity and stability and protect market operators, Nwankwo (2004:18) views the objective of the regulation as to ensure a sound and healthy banking and financial system, protect depositors effectively, address the indigenous community’s savings and investment requirements and accelerate the economic development of the country. Other objectives include developing the banking habit, the financial system and manpower for the banking industry.
The legal basis is the various banking legislations enacted by government at various times which include:
1.                  The CBN Act of 1958 (as amended) in 1998.
2.                  Banks and Other Financial Institutions Decree No 25 of 1991 (as amended)
3.                  NDIC Decree No 22 of 1988.
4.                  Failed Banks (Recovery of Debts) and Financial Malpractice in Bank Act of 1994 (as amended)
There are other Central Bank of Nigeria laws and directives which are issued to banks and the public through their periodic circulars. They include:
5.                  The monetary credit, exchange rate policy circulars
6.                  The prudential guidelines
The laws were put in place to ensure the stability of the banking sector. They were also designed to saddle the banking industry with important responsibilities with regards to the implementation of SAP and the urgent need to reform the nation’s financial system for more orderly and efficient growth of the economy. The streamlining of the monetary policy formulation and implementation enhances capacity of Central Bank of Nigeria to monitor the activities of all operators in the financial system and effectively managing the naira exchange rate. BOFID has restrictions on insider abuse, accepting gratification by banks staff, interlocking directorship. It also prohibits people of questionable characters from being staff of banks. The prudential guideline was issued by Central Bank of Nigeria in 1990 to curb the impact of cosmetic reporting and ensuring reliability of banks’ financial statements. It classified the loan portfolio of banks into performing and non-performing facilities. The non-performing facilities are further classified into substandard, doubtful and lost. While the NDIC was established to insure bank deposits, provide assistance in the interest of depositors, in the event of imminent actual financial collapse of banks and guarantee payments to depositors subject to a maximum amount of two hundred thousand naira (N200,000) per depositor.

2.3        THE BUSINESS PROCESS RE-ENGINEERING (BPR) OPTION
Reengineering offers the promise of drastic improvement in banks’ performance through streamlining the end to end process by which the business creates and delivers value for its customers. However, Lawrekovich (1996:88) argues that, “reengineering concept has become the latest management strategy in the corporate pursuit of a “quick-free” for organizational decay and loss of market share. I submit that reengineering is an old potentially dangerous management strategy. It has failed in the manufacturing industry and it’s poised to be unsuccessful in service industries like banks. The authors took an old concept known as strategic leap, added a few customer driven company elements and renamed it reengineering”.
While many service industries all over the world including Nigerian banks have embraced the concept wholeheartedly, others have rejected it out-rightly because of the excessive types and drastic claims of those seeking to sell reengineering products and services. In fact, many outstanding organizations are battling it, using contrasting images and “buzz words” to sell their reengineering services.
Efforts have been made to highlight important issues as it concerns the BPR project in banks as a restructuring strategy that has been welcome by many Nigerian banks. Issues discussed under the reengineering process include:
1.                  Origin and meaning of the BPR concept.
2.                  Fundamental breakthrough required for reengineering services in organizations.
3.                  Key steps and methodology on how to carry out BPR project in banks.
4.                  The role of BPR in restructuring Nigerian banking system.
5.                  The benefit of BPR for the banking sector in Nigeria.
2.3.1       ORIGIN AND MEANING OF THE BPR CONCEPT
There was clearly a greater debate over the origin of the reengineering concept. Lawrekovich (1996: 88) insists that it is an old concept because, according to him, nothing is new under the sun and that the concept has simply been resurrected by two intelligent professors/consultants. In his words, “Hammer and Champy (1990:22) have repackaged old concept and gave it a new name”. The big question now is, what are these old concepts and how have they been applied?
Heyes and Whechwright (1994:16) argued that American manufacturing companies have reduced their commitment to process engineering and went further to discuss the concept they call “tortoise and the hare” approach to industrial competition. The hare connotes strategic leap or BPR while the tortoise refers to the incremental improvement or what is called Total Quality Management (TQM).
On the whole, re-engineering as a concept was first introduced into common usage in 1990 in a seminar of Harvard Business Review by Michael Hammer who opined that, “it is time to stop paving the cow paths. Instead of embedding outdated processes in software, we should obliterate them, reengineer our business process, use the power of information technology to radically redesign our core process in order to achieve drastic improvement performance”. Also Hammer and Champy (1993) developed the concept further in a book, “reengineering the corporation”, and they provided the definition that, “reengineering is the fundamental reconsideration and radical redesign of organizational processes in order to achieve drastic performance in cost, service and speed”. Value creation for the customer is the leading factor for BPR and information technology often plays an important enabling role. The implication of this definition is that reengineering focuses on the core process. It looks at how the work or business is done and selects the core end-to-end process. It involves rethinking, redefining and redesigning the core process. In fact, it concentrates on the process rather than functions. In some cases, it may lead to a corporate refocusing and design. That is why Saddler (2003) sees business process reengineering as “an approach to eradicate or transform change while focusing on questioning the need for the means of carrying out each of the many processes involved in the organizational task”. However, the essential elements as principles of BPR in banks according to Abolo (1996) and Thomas (1996) are:
1.                  Challenging old assumptions and discarding old rules that are no longer applicable.
2.                  Breaking away from conventional wisdom and the constraints of organizational boundaries.
3.                  Letting rigid specification give way to broad based and cross functional competencies
4.                  Using information technology not to automate outdated process but to radically redesign new ones.
5.                  Externally focus on end customers and generation of greater values for customers.
6.                  Give customers and users a single and accessible point of contract through which they can harness whatever resources and people that are relevant to their needs and interest.
7.                  Internally focus on harnessing more of the potentiality of people and applying it to those activities which identify and deliver value to customers.
8.                  What matters is that people and resources can be assessed and applied when required not where they are located.
9.         Encourage learning and developing by building creative working environment.
10.       Think and execute as much activities as possible horizontally, concentrating on flows and processes through the organization.
11.       Remove non-values activities, undertake parallel activities and speed up responses and development times.
2.3.2   FUNDAMENTAL BREAKTHROUGH REQUIRED FOR REENGINEERING SERVICES IN BANKS
            Abolo (1998) has summarized six critical areas in order to reap quantum gain from BPR.
1.      Traditional hierarchical and inward looking management philosophy needs to give way to an obsessive commitment to adding value to customers. In other words, the bank has to be looked at from the outside and concentrate on the end-to-end process management which serves those customers.
2.      Need to adopt a fundamental or zero based approach to the redesign of new processes.
3.      All too soon, grand ambition and radical options to change are gradually scaled down in the face of organizational politics and apparently immovable road blocks, and this has to be reduced or completely eliminated through radical improvement.
4.      There has to be an integrated approach to close process of selfish and personal ambition and these should not be allowed to blur the entire process, hence, the best approach is one that delivers a balanced and holistic solution for which the relevant system, people and training have been put.
5.      BPR must be people oriented for it to be successful, it must be people centered and managers need to be truly empowered. Open culture and support for innovation should be the reality.
6.      There should be the need to jettison most of the intellectual baggage and condition that binds us to the past for this to happen. This requires the bank’s ability to build and communicate a shared understanding of organization’s preferred vision and create an environment with infrastructures that will actually promote learning and allow imaginations.
In collaborating with Abolo’s (1998) views, Battram P. (1992) sets out a number of success factors which include:
1.      Establish a clear view of strategic purpose.
2.      Ensure top management commitment
3.      Set challenging goals
4.      Redefine the core process
5.      Redesign the process so as to create higher level processes which form major end-to-end activities.
6.      Manage the change process effectively
7.      Create way of facilitating team work between staff from different functions.
8.      Use effective management techniques and information technology and
9.      Adopt a stakeholder’s approach.



2.3.3   KEY AND METHODOLOGY FOR CARRYING OUT A BPR PROJECT IN BANKS

A THEORETICAL FRAMEWORK
A wide range of approaches, methods, tools and techniques exist in literature. Davenport (1992) prescribes a five step approach to implement a BPR project.
1.         Develop the business vision and process objectives.
2.         Identify the business processes to be redesigned
3.         Understand and measure the existing processes.
4.         Identify and select the most suitable and appropriate information technology levers.
5.         Design and build a prototype of the new process. There appear to be some consensus from the discussions so far on the activities that constitute a BPR project.
However, experts differ on the sequence of carrying out these activities. The main aspect of BPR project in the banking sector has been summarized by Sonacks (1998) to include customer surveys to understand both existing and potential customers’ expectations, underlying needs and which criteria most influence their needs for banking services. From these surveys can be derived those processes of the banks that are best for reengineering.
            BENCHMARKING
Benchmarking entails comparing the operating performance at the bank’s business unit, process or activity with its direct competitors, other industry players or best in class banks which have recognized leadership in particular process. Benchmarking is carried out to determine performance gaps for banks to cover up. There is internal and external benchmarking. The internal benchmarking of performance indicates identified performance gaps or varieties and opportunities for information, while, external benchmarking measures performance of core business processes against the performance of industry members, direct competitors and best in class banks. When benchmarking is carried out after a process has been selected for reengineering, it provides basis for a vision of the new process being formulated and enables the incorporation of best practiced achievements elsewhere to set out targets performance, in order to ensure that the radical improvements are achieved. Benchmarking is one of the main techniques used in determining performance targets.

INNOVATION
Radical step change in performance requires innovation in the redesign of core business processes. New ideas and ways of doing things have to be developed, that is, ways that have never been tried before, ways that challenge a business’ sacred cows, and ways that will give the business a real edge over its competitors. This activity is based on rigorous analysis of current process of benchmarking exercise, distilled wisdom obtained from listening to customers’ innate experience and common sense. It does not necessarily mean doing a new thing altogether, rather, doing what others have been doing in a way that is more unique, efficient, effective, different and attractive to the end users.
PROCESS MAPPING AND SIMULATION
Detailed and rigorous analysis of the business processes will be necessary at several stages of a BPR Project. Process mapping and simulation is commonly used to describe what is happening at present and to explore alternative option in terms of what could happen instead. Process mapping will depict the process, identify their components, breakdown large ones into sub processes, document their performances and enable the uncovering of pathologies.
BUSINESS PERFORMANCE APPRAISAL
This covers the financial review. The financial review should be emphasized mainly on cash flows. Since banks deal on money, their activities and performances should better be understood and properly appraised. It should ensure that financial reporting adheres to cash flows. The cash flow analysis will provide a basis for proper comparison and appraisal of any strategy adopted with regard to its financial impact on the reengineering bank vis-à-vis the position before the restructuring process. There should equally be a review of the current information, management procedure and the review of the key performance indicators over the period that is adequate enough for a fair comparison. Such key performance indicators in banks include total deposits, total assets, shareholders’ funds, gross earnings profit after tax, analysis of loans and advances, etc.
CONFIRMATION OF THE BANKS’ STRATEGIC ASSESSMENT
Without a strategic plan in place, a BPR Project will not have a sound basis, it is important to compare process reengineering opportunities and targets with strategic goals, to ensure that the former are not all variance with the later. The confirmation covers an assessment of industry position, critical success factor and so on.
INFORMATION TECHNOLOGY (IT)
The Information Technology (IT) has become all pervasive while redefining the scope of the world business, were the words of Kari(1999). Radical changes in the operation of the business inevitably requires radical changes in IT system. Decisions need to be taken on the most suitable IT Platform to be employed. Opportunities created to the banks by the information technology should be clearly defined, analyzed and optimized.
CHANGE MANAGEMENT
Radical change in business will have a great impact on the people in the organization. Reconstruction of the business will result in the installation of new facilities such as IT System, new organizational structure, new system of working (empowering workers, working in terms etc), performance evaluation and reward system. Its mechanism must be put in place to impact these changes on the people. Change management requires a clear behaviour pattern of the people in the business and deliberate intention to change this into some form of behaviours. The management has to be proactive and in tune with the global changes.
2.3.4       THE ROLE OF BPR IN THE SURVIVAL AND SANITIZING OF THE NIGERIAN DEPOSIT MONEY BANKS
In a review of the banking sector crises of the early 1990s, one would appreciate the role of reengineering in the sanitizing of these banks. This shows that most of the distress problems were due to the ways or the processes of carrying out functions or the way a business is done. It is only in few cases that government policies and rigid regulatory framework led to bank failure, but an effective operational system would have mitigated any harsh impact of regulation and government policies.
At this juncture, it is necessary to explain the concept of business process. This is where I agree with Obeng (1994) that a business process is a set of activities or logically related tasks that must be performed to accomplish a business’ objectives, example, loan syndication, granting an overdraft facilities, granting of a term loan, sourcing savings deposits, procurement of foreign exchange, sale of foreign exchange, opening of letters of credit, informing clients on status of account, sale of bank draft, effecting financial transfer, withdrawal of deposit etc. while some processes are valued by customers, others do not have much impact outside the organization. However, business process reengineering has tried to look at core and non-core business processes in Nigerian banks, tearing them apart while isolating the ineffective strategies and re-emphasize and re-invigorate the areas with competitive edge. These were tendencies to address the causes one by one. For example, attempt could be made to address the high separating cost by instituting cost reduction programmes. Such an attempt will not only fail to address the issue comprehensively using interrelationship among activities in a way that cut across departmental boundaries, it will also be expensive. It is better to adopt an approach that sees the entire organization as a unit and address all the issue comprehensively as a unit and address all the issue comprehensively with a view to strengthening all the business approaches for more robust returns.
The survival strategies adopted by most banks include:
1.                  Taking part in the existing organizational structure and business process.
2.                  Throwing away those elements of them that do not help the business meet its competitive goals.
3.                  Putting what is left back together to form an efficient and customer focused whole in order to create an organization that focuses on the way that work is performed across functions rather than concentrating on function itself.
4.                  Where everyone understands the business goal and how it plans to achieve them.
5.                  Where there are no hidden criteria to the way in which success is measured and working in the cross functional terms is regarded as a norm by everyone.
6.                  Where everyone knows that the overriding objective is the production of a service that the market place perceives as the best.
These survival strategies are what Nigerian deposit money banks have adopted in reengineering their financial outfit. It allows the owners of a bank, the luxury of constructing a commercial entity totally for use on today’s problem while being proactive to future changes. It assumes a zero based approach and builds the entire organization from the scratch. It redesigns the organizational structure, job definition, reward structures, business work flow and control processes while continuing a revaluation of the organizational culture and philosophy. This approach is very imperative to Nigerian banks since both the new generation and their older counter parts cannot claim to be in positive or efficient operation, given what happens to the developed economies and the contribution of globalization to the world economy.
2.3.5   POSITIVE EFFECTS OF BPR TO THE BANKING SECTOR
The adoption of any solution to survival strategy in any business organization ought to be based on the gains expected be derived from it.
The Nigerian banking sector in its present stage has some of the benefits that have been delivered from BPR by each bank that adopts the approach and such benefits can be summarized as:
COST SAVING
These usually arise from thrown away process and from having a slimmer organization where information and action flow more easily. The cost of resources such as staff used for thrown away process is saved.


FREE AND EASIER FLOW OF INFORMATION
Through the new organization with appropriate information technology (IT) being applied, this will create an early warning system that can:
1.                  Throw up incidence of fraud which can be more easily detected before or immediately after being perpetuated..
2.                  Indicate areas of operational problems and inefficiencies for immediate corrective measures to be implemented.
3.                  Identify problem loans, investments and funds placement for urgent attention before they become sticky.
4.                  A customer services in all the banks’ areas of service have significantly improved and this is likely to enhance not only the retention of existing customers but also the gaining of new customers at the expenses of uncompetitive banks.
5.                  Improvement in productivity can finance improvement in staff remuneration.
6.                  Improvement in organization culture and the reward system will improve staff morale and further improve productivity in enhanced human premium.
7.                  All the above will result in significant improvement in financial performance, in profit cash flow and asset liabilities relationship.
2.4        THE MERGER AND ACQUISITION OPTION
As the macro-economic environment in the early 1990s put Nigerian banks in difficulties which lead to the crises and failures of many banks, some strong and surviving ones saw it as an opportunity for business and take over activities like management. While some ailing banks saw the restructuring and sanitizing strategy as a survival strategy exercised as a means of consolidating their gains and enlarging their organization. It was equally seen as a way of rebuilding confident among the banking public.
2.4.1       MEANING OF THE CONCEPT MERGER AND ACQUISITION
Merger implies a combination or fusion of two or more formal independent business units into one organization with a common ownership and management such as in current usage.  A merger is a special ease of combination where both merging companies wish to pin together on agreed term.  Lot (2003) defined merger as a combination of two companies where only one of them survives and continue its existence or at least continue to exist but in modified term.
A consolidation is a type of merger which involves the combination of two or more companies whereby an entirely new company is formed.  All of the old companies cease to exist and the shares are exchanged for the shares in the new company.  Vanhorne (1998) seems to be in agreement with Hampton that “merger is a combination of two or more corporations where only one survives.  Firms’ assets and liabilities are left to the new firm.”  Ahmed (1989) also viewed merger as a unification of previously separate companies into a single corporation”. He explains that merger occurs when one or two of the combining companies survive.
This is illustrated as follows:
If company X and company Y merged and a new company Z emerges, it is called a merger, but where company Y dies and X survives, it is an acquisition. The argument about identity sprang up in disagreement with Ahmed as Joy (1990) in her write up argued that in merger, the identity of both merging companies’ ceases to exist and the surviving company takes any name as maybe wished by the new owner. Acquisition according to her is a situation where management of independently operating enterprises is brought under the control of a single management.
According to Umari (1998), in merger, take over, amalgamation or acquisition, two or more companies come together by the pulling of their undertakings or resources, that is, material money, goodwill, market, skilled personnel, and technology and so on. Acquisition can also be by buying a controlling interest on the share capital of one of the companies.
From the legal point of view, in section 590 of the companies and allied matters decree of 1990”, mergers have been described as any amalgamation of the undertakings of any part or whole of the interest of two or more companies or corporate bodies”. Professor Cower (2002:51) reviewed that under amalgamation, merger or take over, two or more companies are merged either by a consideration of controlling interest in the share capital of one by the other or in the capital of both by a new company. He also stated that mergers and acquisitions are not terms of act with clearly defined and distinguishable legal meaning. They are intervention and can be used interchangeably.

2.4.2       LEGAL ISSUES IN MERGER AND ACQUISITION
In Nigeria, there exists a peculiar economic and legal structure which inhibits the practice of the merger game as it is played in other more advanced countries. Even in United Kingdom, before 1988, there was no formal regulation of the monopoly’s commission. Though these laws have not had serious impact on proactive, the major statutory provisions on mergers in Nigeria up to 1988 are contained in section 197 to 200 of the Companies Act, 1968. Other regulatory provisions are derived directly from the provision of the Nigeria Enterprises Promotion Decree, 1989 and Stock Exchange Commission Act, 1979. The specific goals of both the Nigeria Enterprise Promotion Board and Stock Exchange Commission are clearly spelt out in the Nigeria Enterprises Promotion Act.
There are three routes to a merger as stipulated by the Companies Act. A Company may propose a compromise or arrangement with its members or creditors or only a class of them and submit the same proposal for approval at a monetary meeting, conveyed for that purpose. The majority required for approval of such a proposal is 70 percent of the members or creditors whose rights would be affected by the proposal. Voting is either in person or by proxy at the meeting. If approved, the court may sanction the action after satisfying itself on the number of points namely:
1.                  The proposal is not ultra-vires the company or otherwise illegal.
2.                  The prescribed statutory majority in support of the proposal have been duly met.
3.                  That the requirement stipulated by the act and other statues to be exercised have been fulfilled.
4.                  All conditions precedent contained in the proposal itself have been fully met.
5.                  The court must be satisfied that the arrangement is only fair and reasonable.
Once the above conditions have been met, the court would approve the proposal and it would become binding. The law also provides that, unless otherwise agreed, the cost of merger is usually borne by the participating companies.
2.5        SYNERGY: AN EFFICIENCY INDICATOR IN BANK SANITIZING
Efficiency theory contents that redeployment of corporate assets is accomplished through many forms namely merger tender offers, divestitures and spin-offs. It holds that corporate assets redeployment requires improving the performance of the management after sanitizing or achieving a form of synergy.
Looking at the Nigerian banking sector critically and considering the wave of sanitizing going on in the system, opinions have been raised that there are too many banks in the system and CBN still license more new banks. The resultant effect of this move is intensifying at the level of competition in the system which in their opinion is considered to be highly competitive. They contended that banks should go into mergers as a way of checking the level of corruption.
Meanwhile, another school of thought led by Adedotun and Anderson {1996), consulting, opined that the Nigerian banking system have not reached their optimal level in the number of banks. At optimal level, everybody that needs banking services will get it at comparative rates. At that level, every bank can still survive until it gets to a stage where every bank must be effective and those that cannot cope must fall by the way side. On the importance of synergy in the efficiency of any prospective merger, Adedotun (1996) warned that for a merger or any combination to make sense, there must be something in merger that makes it necessary in synergy. Synergy should be seen as the primary motive and purpose for merger which is to increase the value of the combined enterprise in terms of raising the market value per share over what they would have otherwise be. It is something that one merging party has that the other party needs. For example, if bank A has a good management, good products and satisfied customers but with inadequate capital, while bank B has much capital but poor management and lack of good product, when bank A and B merge, a winning formula emerges. This is the work of synergy. Therefore, synergy is that issue in merging companies which makes the combined values of the company greater than the individual companies taken separately. Many scholars have called it “2 + 2 = 5 effects”. The effect of synergy can arise from various ways such as operating economies which result from economies of scale in management of product/service delivery, and staffing in which case duplicating facilities can be eliminated.
In many cases, increased profits can be generated when a bank merges with another , dealing with complementary products and services, that is, a merchant bank can merge or go into a relationship with a commercial bank to take advantage of the clearing house facilities from the commercial banks. Synergistic effects can be achieved through BPR. In this case, the various subsystems or departments in the bank should be coordinated and focused towards achieving a greater purpose than they would have achieved. This is the message which the advocate of BPR is carrying which in the end would result in higher performance than was obtainable before the project. All would not make any sense if some level of synergy is not achieved.
2.6        NATURE OF DEPOSIT MONEY BANKING IN NIGERIA
In Nigeria, deposit money banking could be classified into two categories. The first category comprises banks wholly owned by indigenous Nigerians and are referred to as indigenous banks, while, the second category comprises those jointly owned and managed by Nigerians and private investors, usually foreign investors but majority of their shares are owned by indigenous Nigerians and are therefore referred to as mixed banks.
For deposit money banks to effectively carry out their intermediary role, they mobilize funds from the surplus spending segments through the following accounts maintained by them:
1.                  Current Account
2.                  Savings Account
3.                  Time Deposit Account
Interests are payable on the balance standing to the credit of savings account and time deposit account. The interest payable on time deposit account is usually higher than that payable on savings account, while, the bank charges commission for services rendered to customers who own current account. For effective operations, certain other services are rendered by them to their customers. Some of these services are:
1.                  Granting of credit facilities
2.                  Granting of money through credit multipliers
3.                  Safe keeping of valuables for customers
4.                  Provision of foreign exchange services
5.                  Giving business advice to customers
6.                  Acting as referees to customers
7.                  Transfer of money through standing order.
2.7        A HISTORICAL OVERVIEW OF FIRST BANK OF NIGERIA PLC
First Bank of Nigeria Plc was founded in 1894 by Sir Alfred Jones, a shipping magnate from Liverpool, England. The Bank has provided excellent banking services since inception and hence, contributed to the economic growth and development of Nigeria for 114 years. Incorporated as a limited liability company with its head office originally in Liverpool, the Bank commenced business on a modest scale in the premises of Elder Dempster and Company Limited in Lagos under the name – Bank of British West Africa (BBWA) with paid up capital of £12,000. This was after absorbing its predecessor – the African Banking Corporation, which was established in 1892. In 1912, the Bank also acquired its first competitor – the Bank of Nigeria (previously called Anglo-African Bank) which was established in 1899 by the Royal Niger Company.
In response to a rapidly changing economic and business environment, the Bank has at various times restructured its operations. For example, 1957, the Bank changed its name from Bank of British West Africa (BBWA) to Bank of West Africa (BWA). In 1966, following its merger with Standard Bank, UK, the Bank adopted the name Standard Bank of West Africa Limited and in 1969, it was incorporated locally as the Standard Bank of Nigeria Limited in line with the Companies Decree of 1968. Changes in the name of the Bank also occurred in 1979 and 1991 to First Bank of Nigeria Limited and First Bank of Nigeria Plc, respectively.
First Bank is widely acknowledged as a national icon and a worthy ambassador of the Federal Republic of Nigeria in the International Financial Community.
2.8        DEPRESSED ECONOMY
An economy is a system that has to do with the creation, acquisition, management and use of both human and material resources of a household, community or nation. An efficient and prudent operation of the systems of such nation certainly led to a buoyant economy. The reverse would lead to a recession which often degenerates into a depression. An economy is said to be buoyant when there is:
1.                  Full employment
2.                  Steady economic growth
3.                  Stable Price
4.                  Equitable distribution of income
5.                  Favourable balance of payments
Having known the characteristics of a prosperous economy, then, what does a depressed economy mean and what are its characteristics?
A depressed economy is the opposite of a prosperous one. An economy is said to be depressed when there is a high degree of unemployment of human and other factors of production of goods and services, low level of national income, low investment and may have a high rate of inflation.
Characteristics of a Depressed Economy
The following are among the characteristics of a depressed economy:
1.         Prevalence of unemployment of factors of production
2.         Dominance of unfavourable balance of payment
3.         High rate of inflation
4.         High price of goods and services which are now mostly imports.
5.         Foreign intrusion on political matters.
2.8.1   CAUSES OF ECONOMIC DEPRESSION
1.         Over dependence on imported goods and services thereby draining the importing nation’s precious funds that would otherwise be used for domestic investment.
2.         Lack of technological know how for the production of goods and services.
3.         Misplacement of priority by government in their investment spending, where government spends yearly on unproductive venture. It will certainly have adverse effect on the economy as such “dormant” projects will not generate extra funds nor job opportunities.
4.         Existence of low interest rate thereby discouraging savings. It is  well known fact that where there is no savings, there will nothing to invest with.
5.         ‘Bottle neck condition” placements in bank loans which scare away would be borrowers.

CHAPTER THREE
3.0       RESEARCH METHODOLOGY
3.1       RESEARCH METHOD
This study is an analytical one, while the scientific method of investigation and reporting of research work is adopted. For this reason, opinion of professionals and the public about the subject matter was sought. Some of the data from this group are considered necessary facts which form a good basis for the theoretical concepts and analysis. It is only necessary that research questions be answered on the basis of the data which is the major responsibility of the design that will anchor the pragmatic solutions to the research questions.
3.2       DETERMINATION OF POPULATION SIZE OF THE STUDY
The population of the study in research statistics can be described as an entire number of people, objects, events and things all of which have one or more characteristics of interest to a study. It is the target of study for collection of data.
The population of interest of this study is the 25 deposit money banks that survived the N25 billion recapitalization exercise. These include:
1.                  First Bank of Nigeria Plc
2.                  UBA Plc
3.                  Union Bank of Nigeria Plc
4.                  Zenith Bank Plc
5.                  Guaranty Trust Bank Plc
6.                  Intercontinental Bank Plc
7.                  Standard Chartered Bank Ltd.
8.                  Oceanic Bank Plc.
9.                  Access Bank of Nigeria Plc
10.             Afribank Group
11.             IBTC Chartered Bank Plc
12.             Diamond Bank Group
13.             Skye Bank Group
14.             Wema Bank Group
15.             First City Monument Bank Plc
16.             Platinum Habib Bank Plc
17.             Fidelity Bank Plc
18.             NIB/Citibank
19.             Sterling Bank Group
20.             First Inland Bank Plc
21.             North Omega Bank
22.             Devcom /ETB Ltd.
23.             Citizen Guardian
24.             Unity Bank Group
25.             Ecobank Nigeria
3.3       DETERMINANT OF SAMPLE SIZE
Sampling entails choosing to obtain information from a part of  group or population of interest. The motive behind sampling is to use the information obtained from a part of the population to take decision on the whole.
The method used for determining the sample size in this study was based on simple percentage approach. Using simple percentage approach, thus, the research is limited to one of the deposit money banks constituting 4% of the entire population which can be illustrated thus:
1          x          100
25                      1

=          4%

Therefore, out of these survived banks, this study will be restricted to one bank because a research of this nature would require sufficient time, finance and material to carry it out effectively. But due to the constraint, stress, time and dearth of material available, it becomes increasingly necessary to anchor this research on one bank in order to carry out a thorough and effective research of the bank under study.
More so, as a dependably dynamic bank in Nigerian economy and for the fact that it survived the N25 billion recapitalization exercise, it has also become imperative to use the bank as a case study. It is my believe that the resultant effect of what is gleaned from the analysis of the First Bank would be used to ascertain the survival of deposit money banks in a depressed economy like ours, Nigeria. At the end of the research, the researcher would have satisfied herself that the work could be beneficial to other researchers..
3.4       METHOD OF DATA COLLECTION
This research relied mainly on the secondary data like already published reports, financial reports or journals and CBN publications etc. Secondary data sources are documented works of others (authors) that are related to the subject matter of study.
In view of the nature of this study, the researcher extensively made use of relevant data from previous works of other authors in the field such as materials like financial journals, Central Bank of Nigeria publications which include bullion, economic and financial reviews, economic and financial indication briefs and CBN statistical bulletin. Also, Annual Reports of First Bank for various years was of great importance.
3.5       METHOD OF DATA ANALYSIS/INTERPRETATIONS
The method of data analysis will include tabular presentation and analysis, calculation of percentage and presentation of charts. Tables and charts will be designed specifically for the subject matter. However no table is reproduced directly from the source documents but data obtained from the source are used to build tables and charts. Sources of data in table are indicated by the source label at the bottom of the tables.
The analyses of the underlisted performance are the criteria used to ascertain the survival of deposit money banks in a depressed economy with respect to the First Bank of Nigeria Plc.
a.         analysis of the structure of total assets
b.         analysis of the total deposits
c.         growth structure of shareholders funds
d.         analysis of loans and advances
e.         analysis of profit before tax.
It is believed that the result of the analysis of the above performance indices will indicate the general performance of the bank studied with regards to its ability to survive the depressed economy.


CHAPTER FOUR
4.0       DATA PRESENTATION AND ANALYSIS
4.1       FINANCIAL STATEMENT OF FIRST BANK PLC FOR THE MONTHS ENDED 31 MARCH

2008
2007
2006
2005
2004
2003

N’M
N’M
N’M
N’M
N’M
N’M
Cash and short term funds
89,076
60,881
49,444
30,220
22,509

Due from other banks and financial institutions

247,059

137,864

94,029

64,143

80,369

Bills discounted
147,680
159,832
108,316
100,135
92,922

Trading securities
93,396
71,477
-
-
-

Investments
71,532
64,048
63,729
24,655
16,825

Loans and Advances
437,768
219,185
175,657
114,673
78,040
53,689
Advances under financial lease
10,297
3,043
1,701
937
-

Other assets
39,498
29,701
31,317
30,625
11,596

Equipment on lease
-
-
-
-
665

Fixed assets
29,155
16,850
13,952
12,108
9,564

Good will
-
-
1,984
-
-

TOTAL ASSETS
1,165,461
762,881
540,129
377,496
312,490
260,580
LIABILITIES






Deposits and Current Accounts
661,624
581,827
390,846
264,988
206,643
168,298
Due to other banks
44,281
14,448
323
390
538

Tax payable
5,091
5,710
4,148
3,954
4,022

Deferred taxation
6,712
2,671
2,751
2,010
1,533

Dividend
-
-
5,238
6,325
5,429

Other liabilities
78,492
58,773
75,843
55,157
55,704

Long term borrowing
29,414
22,101
-
-
-


825,614
685,530
479,149
332,824
273,869

SHAREHOLDER’S FUNDS
339,847
77,351
60,980
44,672
38,621
33,580

1,165,461
762,881
540,129
377,496
312,490

Gross earnings
130,600
79,299
61,243
49,475
45,121

Profit on ordinary activities before taxation

38,020

22,097

16,128

15,145

14,106

13,150
Extra ordinary item
-
-
3,703
-
-

Profit on ordinary activities after taxation and exception item

30,473

18,355

16,053

12,184

11,096

Profit after taxation
30,473
18,355
16,053
12,184
11,096

Amortization of goodwill
-
1,984
1,984
-
-

Profit attributable to ordinary shareholders
30,473
16,371
14,069
12,184
11,096

Dividend
-
-
5,238
6,325
5,429

Return on shareholders funds
9%
21%
23%
27%
29%

Earnings per share (basic): - Basic
223K
156K
269K
308K
381K

Dividend per share – actual

-

100k

100k

160k

155k

Dividend cover (times)
-
1.12
2.69
1.93
1.00

Source: First Bank of Nigeria Plc, 2008 Publication
TABLE 4.1: STRUCTURE OF ASSETS AND LIABILITIES OF
                        FIRST BANK
Table 4.1 shows the structure of assets and liabilities of First Bank Plc under study. The bank is studied for various years of their operations before adopting survival strategy and restructuring, and their operations after sanitizing and restructuring.
In First Bank Plc, three years results which include 2003, 2004 and 2005 are for periods before survival strategy was adopted, while, the other three years results which include 2006, 2007 and 2008 are for periods after survival strategy was adopted.
4.2             ANALYSIS OF TOTAL ASSETS
Question 1: Has there been any improvement in the bank’s assets as a result of the restructuring?
Extracting table 4.2.1 below from table 4.1 above, one will observe that the total assets in 2003 were N260, 580 million which forms the base year of the analysis of the performance. In 2004, the bank’s assets grew by 19.9 percent, moving from N260, 580 million to N312,490 million. The 2005 performance needed to be improved upon and also saw a percentage increase of 20.8 with the total assets moving from N312, 490 million in 2004 to N377, 496 million in 2005, giving a growth of N65, 006 million from N51,910 million.
In 2006, after the adoption of survival strategy and restructuring the bank’s assets grew by 43.1 percent, but there was a slight decline of 41.2 percent in 2007. This is likely to be as a result of the fact that the bank was still finding it a little difficult to adapt fully to the survival strategy and restructuring introduced in 2006. The 2008 performance showed a remarkable improvement in the growth of total assets which grew by 52.8 percent.
TABLE 4.2.1 GROWTH STRUCTURE OF TOTAL ASSETS
YEAR
AMOUNT
GROWTH DECLINE
GROWTH RATE

N’M
N’M
%
2003
260,580
-
-
2004
312,490
51,910
19.9
2005
377,496
65,006
20.8
2006
540,129
162,633
43.1
2007
762,881
222,752
41.2
2008
1,165,461
402,580
52.8
Source: Compiled by the Researcher


FIG. 4.1: A BAR CHART REPRESENTING THE GROWTH STRUCTURE OF TOTAL ASSETS OF FIRST BANK PLC.

FIG. 4.2: GRAPHICAL ANALYSIS OF GROWTH PATTERN OF
                   FIRST BANK PLC TOTAL ASSETS
 
4.3             ANALYSIS OF TOTAL DEPOSITS
QUESTION II: Has there been increase in deposit mobilization?
III: To what extent has depositors’ confidence been restored?
In theory, banking is a very simple business. Banks take in deposits from people and lend them out. If they do not make loans, they cannot make profit, and if they do not have deposits, they cannot make loans. So the whole process starts with deposit mobilization. According to Albert Brown (1990:7), you cannot increase the size of a bank by making loans but your bank can grow by increasing deposits. It is based on high mobilization that a bank could create its assets and a high profitability. So, the analysis of this variable could be seen as the genesis of banking business as its growth will invariably transmit growth to other indices.
TABLE 4.3.1: FIRST BANK’S STRUCTURE OF TOTAL DEPOSITS
In the 2003 position which is the base year, the total deposit liabilities of the bank stood at N168.298 million. It represents various types of deposits held by the bank (Savings, Demand and Time Deposits). In 2004, the bank’s total deposits increased by N38, 345 million to close at N206,643 million representing a growth rate of 22.8 percent. As shown in table 4.3.1 below, the 2005 total deposits is N264, 988 million deposits which represented a growth rate of 28.2 percent and an increase of N58, 345 million.
With the sanitizing and restructuring of the bank, the total deposits rose to higher growth rate percentage of 47.5 in 2006 and 48.9 in 2007; but there was a drastic fall in 2008, when the growth rate fell to 13.7 percent reaching a total deposit of N661, 624 million with a decrease of N79, 797 million in the bank’s total deposits. This could be as a result of the bank’s carelessness as it felt it has won the depositors’ confidence and so it had no need for more survival strategy.
TABLE 4.3.1            FIRST BANK’S STRUCTURE OF TOTAL DEPOSIT
Year
Amount
Growth Decline
Growth Rate

N’m
N’m
%
2003
168,298
-
-
2004
206,643
38,345
22.8
2005
264,988
58,345
28.2
2006
390,846
125,858
47.5
2007
581,827
190,981
48.9
2008
661,624
79,797
13.7
Source: Compiled by the Researcher

FIG. 4.3: A BAR CHART SHOWING THE GROWTH STRUCTURE OF FIRST BANK’S DEPOSIT



FIG. 4.4: GRAPHICAL ANALYSIS OF GROWTH PATTERN OF
                   FIRST BANK PLC TOTAL ASSETS

4.4             ANALYSIS OF LOANS AND ADVANCES
QUESTION IV: Has there been increase in the size of loans and advances?
In section 4.3 above, it was agreed that the banking business starts from deposit mobilization and goes into making the funds so mobilized available to the deficit segment of the economy for investment purposes. In as much as the banks mobilize deposits, their ability to service these deposits depends highly on the level of income that they make from investing these deposits. Investing deposits of banks invariably involves creation of money through loans and advances.
In doing this, banks should ensure that such facilities are performing and in accordance with the prudential guidelines for credit classification. The prudential guidelines on loan portfolio classification were released by the Central Bank of Nigeria in 1990 to guide banks on the classification of their credit facilities according to the performances. The credit portfolio of banks according to prudential guidelines, are classified as either performing or non performing.
A facility is said to be performing when the payment of both the principal and interest are up to date and in accordance with the terms of the credit agreement.
A non performing facility is that which the terms of the loan agreement have been factual and can further be categorized into:
i.          Sub-Standard: When both the interest and principal have remained unpaid and outstanding for more than 90 days but less than 180 days.
ii.         Doubtful Loans: Facilities which both the principal and interest remain unpaid and outstanding for at least 180 days but less than 360 days and are not secured by realizable collateral or security.
iii.       Lost Loans: Facilities on which principal and interest are outstanding and unpaid for 360 days or more and not secured by legal title or realizable security.
TABLE 4.4.1:           ANALYSIS OF FIRST BANK’S STRUCTURE OF LOANS AND ADVANCES
Table 4.4.1 below shows that the bank granted loans and advances of N53, 689 million in 2003 which later grew by 45.4 percent moving  up to N78, 040 million in 2004 which gave rise to a growth of N24, 351 million. In 2005, the loans and advances saw a growth rate of 46.9 percent which gave rise to N114, 673 million.
In 2006, when the process of survival strategy and restructuring was adopted, the bank’s loans and advances rose up to N175, 657 million with a growth rate of 53.2. However, the adoption had a negative effect on the bank in 2007 by 24.8 percent in loans and advances keeping the figures at N219,185 million with a growth decline of N43,528 million. With the bank’s consistency in the strategy, the 2008 performance of the loans and advances experienced a high growth rate of 99.7 percent reaching the level of N437,768 million.
TABLE 4.4.1            FIRST BANK’S STRUCTURE OF LOANS AND ADVANCES
Year
Amount
Growth Decline
Growth Rate

N’m
N’m
%
2003
53,689
-
-
2004
78,040
24,351
45.4
2005
114,673
36,633
46.9
2006
175,657
60,984
53.2
2007
219,185
43,528
24.8
2008
437,768
218,583
99.7
Source: Compiled by the researcher





FIG. 4.5: A BAR CHART SHOWING THE GROWTH STRUCTURE OF FIRST BANK’S LOANS AND ADVANCES



FIG. 4.6: A GRAPHICAL REPRESENTATION AND ANALYSIS OF THE GROWTH STRUCTGURE OF FIRST BANK’S LOANS AND ADVANCES
    


4.5             ANALYSIS OF PROFIT BEFORE TAX
QUESTION V: How has the strategy impacted on the bank’s profitability?
If we believe that the primary goal of the owners of a bank for going into banking business is profit making then our thought process logically leads us almost in the direction of profitability and liquidity.
In First Bank Plc, the performance of the bank in respect of profitability followed the trend of marginal increase before adopting the survival strategy. This is depicted in table 4.5.1 as the bank in 2003 posted a profit before tax (PBT) of N13,150 million which immediately set into increasing trend in 2004 when the bank recorded a pre-tax profit of N14,106 million which reflects an increase by 7.3 percent from the 2003 profit. Also, in 2005, the performance showed that the bank improved and recorded 7.4 percent with growth of N1.039 million, thereby bringing the total figure of pre-tax profit to N15, 145 million.
However, in 2006 when the bank went into survival strategy and restructuring, the performance went dwindling as the bank recorded a decline of 6.5 percent, and a profit before tax of N16, 128 million. The 2007 recorded an enhanced performance. Profit before tax rose to N22,097 million with 37 percent growth rate. The 2008 report saw the bank recording a 72.1 percent growth in profit as it made a profit before tax of N38,020 million with an increase of N15,923 million.
Looking at the structure, it could be seen that the gains of survival strategy and corporate restructuring in First Bank started manifesting in 2007 when the programme of re-engineering was fully implemented.
TABLE 4.5.1: FIRST BANK’S STRUCTURE OF PROFIT BEFORE TAX (PBT)
Year
Amount
Growth /Decline
Growth Rate

N’m
N’m
%
2003
13,150
-
-
2004
14,106
956
7.3
2005
15,145
1,039
7.4
2006
16,128
983
6.5
2007
22,097
5,969
37.0
2008
38,020
15,923
72.1
Source: Compiled by the researcher


FIG. 4.7: A BAR CHART SHOWING THE GROWTH STRUCTURE OF FIRST BANK’S PROFIT BEFORE TAX (PBT)
FIG. 4.8: GRAPHICAL ANALYSIS OF GROWTH PATTERN OF FIRST BANK’S PROFIT BEFORE TAX (PBT)
4.6             ANALYSIS OF SHAREHOLDERS’ FUNDS
QUESTION VI: What impact has the strategy made on the shareholders’ funds?
The major business of banks is financial intermediation that is, collecting deposits and creating loans. Banks are seen as institutions that play a very vital role in capital formation and financing of other businesses by providing the needed funds to other sectors of the economy for investment purposes. For this to be meaningful and for banks to be effective in carrying out this odious responsibility, they should be adequately capitalized. Capital is very necessary in the life of a bank as it provides some form of buffer or cushion effects for the institution in case of any serious loss without affecting the depositors’ funds. So, capital can be seen as an inbuilt mechanism to cushion the effect of losses on banks to mitigate its impact on deposits which banks are obliged to pay back to the depositors on demand.
It is necessary to know that the shareholders’ funds in 2003 stood at N33,580 million; and in 2004, there was an increase in the growth rate by 15 percent bringing the total funds to N38,621 million. In 2005, the funds grew by N6,051 million resulting to a total increase of 15.7 percent in shareholders’ funds to arrive at N44,672 million resulting to a total increase of 15.7 percent in shareholders’ funds to arrive at N44,672 million.
The 2006 marked out the first year into survival strategy and restructuring of the bank. The fund was ready for capitalization as it witnessed an addition of N16,308 million, raising the total funds to N60,980 million with an increase of 36.5 percent. The 2007 also experienced an increase of 26.8 percent in shareholders’ funds bringing the total funds to N77,351 million.
Finally, in March 2008, when the bank released their annual report, the funds rose extensively to N339,847 million with an increase of 339.4 percent and a growth of N262,496 million. This was achieved through an offer for subscription which reflected the investors’ gain of confidence in the bank’s survival strategy and restructuring exercise.
TABLE 4.6.1            FIRST BANK’S GROWTH STRUCTURE OF SHAREHOLDERS’ FUNDS
Year
Amount
Growth/ Decline
Growth Rate

N’m
N’m
%
2003
33,580
-
-
2004
38,621
5,041
15.0
2005
44,672
6,051
15.7
2006
60,980
16,308
36.5
2007
77,351
16,371
26.8
2008
339,847
262,496
339.4
Source: Compiled by the Researcher




FIG 4.9:         GRAPHICAL PRESENTATION AND ANALYSIS OF THE GROWTH IN SHAREHOLDERS’ FUNDS

CHAPTER FIVE
5.0       SUMMARY, CONCLUSION AND RECOMMENDATION
5.1       SUMMARY
This study was designed to analyze the variables that affect banks’ performance and the impact of survival strategy and corporate restructuring on these variables. This chapter is organized in line with the research objectives with a view to stating the findings the way they are, while being mindful of the research questions.
Based on the above premises, the study made the following findings:
5.1.1   TOTAL ASSETS
In the total assets of First Bank Plc in 2006 there was a high increase in the growth rate percentage of 43.1 percent as a result of the adoption of survival strategy and restructuring exercise. In 2007, the bank experienced a slight decline in the growth rate percentage of 41.2 percent showing that the bank had a little difficulty in the process. In 2008, the bank rose again and showed a remarkable improvement in the total assets which grew by 52.8 percent.
5.1.2   TOTAL DEPOSITS
According to the finding in total deposit of the bank between 2006 and 2007, there was an increase in the growth rate percentage of the bank by 47.5 and 48.9 percent respectively which made the bank to gain depositor’s confidence in the bank’s performance. But in 2008, there was a drastic decline in the growth rate percentage of 13.7 percent. This is due to inability of the bank to adapt fully to the survival strategy and restructuring exercise thereby loosing depositors’ confidence in the bank gradually.
Due to the effect of the exercise being felt by 2006 and 2007, I will predict that in future the bank will improve on its deposit mobilization and will make much profit which will restore depositor’s confidence in them because depositors are anxious to deposit their funds in a good performing bank.
5.1.3   LOANS AND ADVANCES
The gains of survival strategy and corporate restructuring in First Bank Plc started manifesting fully in 2006 when the programme of reengineering was being implemented with an increase in the growth rate percentage of loans and advances by 53.2 percent. Even though there was a decline in 2007 when the growth rate fell to 24.8 percent, the 2008 performance was highly encouraging when the growth rate percentage rose sharply to 99.7 percent.

5.1.4   PROFIT BEFORE TAX (PBT)
In 2006, the bank recorded a decline in the growth rate percentage of 6.5 percent due to the effects of survival strategy exercise which has not been fully felt by the bank. However, the impact of the exercise started showing a positive result in 2007 when the Profit Before Tax (PBT) rose sharply to 37 percent. Also, in 2008, the growth rate percentage rose greatly to 72.1 percent.
5.1.5   SHAREHOLDERS’ FUNDS
With the introduction of survival strategy and restructuring in 2006, the shareholders’ funds of First Bank Plc increased greatly by 36.5 percent. There was a decline of 26.8 percent in the growth rate in 2007. But the 2008 performance showed a remarkable improvement when the growth rate percentage grew extensively by 339.4 percent.
5.2       CONCLUSION
In this era of an ever changing and competitive global economic environment, especially now that the current economic approach of the government is moving towards openness and enthronement of a market based economic system and with globalization being the major force that enhances growth and development, Nigerian banks cannot afford to be left behind. The researcher strongly advocates that banks should continuously review, redesign, refocus and reengineer their core business processes on a period basis to ensure that they are competitively relevant in the global market.
This is why this study undertakes to detail out the processes, methods and gains of adopting survival strategies and restructuring and its roles in the banking sector in a depressed economy.
It is my belief that with a good implementation of the approaches and recommendation here in the issues of distress; inefficiency and its associated problems will be a thing of the past.
Nigerian banks will be at the rank of global banks’ rating while playing their lending role in resource mobilization, ushering in an era of effective payment system and providing the necessary impetus for economic growth in a depressed economy.
5.3       RECOMMENDATION
The results of this study indicate that the survival strategies and restructuring brought about growth in the bank performance as depicted by the performance indices. On this ground, this study recommends that:
1.                  There should be enthronement of efficiency in the delivery of services through enhancement of technology in banking and seeing it as a necessity that should be approached vigorously by all banks.
2.                  Banks should ensure that their business process is given a global image. They should realize that competition is beyond their location and should de-emphasize geography. Competition among banks now is moving beyond the geographical boundaries and banks should be forced and equipped to face the challenges. They should equally be customer focused.
3.                  The process should enthrone appropriate mechanism for training and retraining both management and staff. This will equip the banks with adequate manpower for new challenges and competition.
4.                  The executive committee which includes the chief executive should ensure that adequate resources (human, material and financial) for change process are assigned to the programme while all barriers should be identified and removed.
5.                  Performance targets should be set with appropriate monitoring process which should be jointly agreed upon by both the management and staff.
6.                  Adequate attention should be given to staff motivation. The management should recognize and appreciate high performance and proper compensation should be ensured.
7.                  Globalization is one of the major forces behind the rapid changes. Bank executives should adopt a proactive and visionary management style that identifies future changes and be equipped.
8.                  Survival strategies and restructuring should not be seen as an end in itself, rather it is a means to an end. So, the process should continually evolve with a review and amendment of the existing process.
9.                  Government should ensure the stability of operating environment for banks. The liberalization policy should be vigorously pursued to enable banks and business decision makers to work freely within a wider horizon with reasonable degree of certainty about the environment for speedy and more effective decision making.
Finally, the researcher leaves the work open for further research and criticism by other researchers.

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JOURNALS ARTICLES
Abolo, E. N. (1998, December 13). Team Building and Reengineering. First Bank of Nigeria Bi-Annual Review, Vol. 6, No. 13. P 40.
Adedoyin, Soyimbo. (1996). The Effects and Challenges of Financial Liberalization. The Nigerian Banker, Vol. 3, No. 6, P. 43.
Aderingbe, J. O. (1997). Monetary Policy and Financial Sector Reforms. Bullion, Vol. 26, P. 12.
Ekpaeyong, D. (1995). The Impact of Regulation and Deregulation on the Banking Sector. The Nigerian Banker, Vol. 8, No. 11. P. 8.
Ibi, A. (2005, December 7). An Overview of Nigerian Macro-Economic Environment. Economic and Financial Review, Vol. 34, No. 4, P. 26.
Joy (199). Banking Services, Minimum Cash Balances and the Firms’ Demands for Money. Journal of Finance, P. 12.
Lawrekovich , S. N. (1996). Reengineering: Is it Safe and is it Really New? Journal of Industrial Management, P. 88.
Ojo, M. O. (1991). Deregulation in the Nigerian Banking Industry. A Review and Appraisal of Economic and Financial Review, Vol. 1, No. 1, pp. 1-4.
Okafor, F. O. (1998). Implication of Deregulation of the Financial System on Banks. A Journal of Banking and Finance, P. 3
Adedotun, & Anderson. (1996, March 15). Corporate Nigeria Needs Better Management. This Day, P. 9.
Anaeto, Emeka. (1998, November 23). Counting the Gains of Corporate Restructuring. Business Times, P. 41.
Elumelu, T. (1998, December 7). Nigerian Banking Industry and the Challenges of the 21st Century. Daily Champion, PP. 26-27.
Hunder, M. (1997, May 8), Reengineering Nigerian Banking. Guardian, P. 12.
Kari, M. (1999, June 15). Implication of Information Technology for Nigerian Banks. Business Times, P. 51.
Knight (1993, June 6). Sanitizing the Financial System for Growth and Stability. Business Times, pp. 29-45

UNPUBLISHED WORK
Abolo, E., & Thomas, C.(1996). BPR Versus Other Changes Methodologies: A Paper Presented at the Workshop on Bank Restriction Organized by Coopers and Lybrand Associates Ltd. at Gateway Hotel Otta, 15 – 23.
Ahmed, M. (1989). Mergers and Acquisition as Alternative Growth Strategy to Nigerian Firms under SAP. Nigeria Institute of Management Seminar, Lagos.
Ezikpe, J. N. (1993). Corporate Responsiveness to Structural Changes: Lectures and Proceedings of Bank Directors Seminar. Lagos: Financial Institution Training Centre, Pp. 36 – 58.
Odozi, V. A. (1991).Welcome Address. Proceedings of the Bank Directors Seminar, P. 16.
Okafor, I. G. (2009). Nigeria Financial System. Unpublished Lecture Module for Banking and Finance Students.
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