The term mergers and acquisition cannot be complete or well explained in Nigerian banking sector without making reference to bank consolidation policy of Prof. Charles C Soludo which sort to increase minimum paid-up share capital requirement of Nigeria Banks from #2 Billion to #25 billion in July 2004, with December 31, 2005 as the deadline. The aim of the policy was to increase the paid-up share capital which amongst other things will strengthen the financial capacity and effectiveness of the Nigerian banking sector. Ugwu (2006) Following the 18 moths ultimatum given by the central bank of Nigeria on July 2004 to all deposit taken banks in Nigeria to increase their paid-up capital to minimum of #25billion with a deadline on December 31 2005, most banks resorted to mergers and acquisition.

There has been an aggressive foray of Nigerian banks into foreign countries in a bid to offer their ever dynamic and expanding range of products and services to markets brimming with perceived opportunities. For example, since first Bank (as the first bank to set foot on the shores of Europe, specifically the United kingdom) and Union Bank of Nigeria plc (which followed a year after), more recent emigrants included the likes of zenith bank plc, Guaranty Trust Bank Plc (the first Nigerian bank to offer full fledged commercial banking services: both corporate and retail: having received its operational license form FSA, financial service Authority, one of the strictest financial regulatory authorities in the world) and intercontinental bank Plc. Access bank which opened for business on October 15, 2008 is the latest of the pack. United bank Africa plc also has its registered office in the United States of America. All of these, not to mention the rapid expansion of several Nigerian banks into several African continents. In 2009, Ecobank transnational incorporated has disclosed plans to up shop in France CIBN (2008).

The term merger, acquisition and consolidation are often used interchangeably. However, there are some differences. A merger refers to the combination of two or more organization into one larger organization. Such actions are commonly voluntary and often result in a new organizational name (often combining the names of the original organizations). According to Coyle, (2000) merger is a voluntary amalgamation of two firms on roughly equal terms into one new legal entity. Mergers are effected by exchange of the pre-merger stock (shares) for the stock of the new firm. Owners of each pre-merger firm continue as owners, and the resources of the merging entities are pooled for the benefit of the new entity. If the merged entities were competitors, the merger is called horizontal integration, if they were supplier or customer of one another, it is called vertical integration. Cossey, B., (1991). An acquisition, on the other hand is the purchase of one organization by another. Such actions can be hostile or friendly and the acquirer maintains control over the acquired firm. Mergers and acquisitions differ from a consolidation, which is a business combination where two or more companies join to form an entirely new company. All of the combining companies are dissolved and only the new entity continues to operate Kalu,  (2000).
Section 590 of the Nigerian companies and allied Matters act 1990 defines merger as “any amalgamation of the undertakings of any part of the undertakings or part of the undertakings of one or more companies and one or more bodies corporate’. In the same vain, Gaughan (2007) defines merger as “a combination of two or more corporations in which only one corporation survives” he further stated that the acquiring company assumes the assets and liabilities of the merged firm. Okonkwo (2004) writes that a merger may be achieved through acquisition, in this case, the shareholders of the acquired company are paid off and the acquirer becomes the owner of all or a substantial part of the assets of the acquired company. Also Kalu (2003) stated that terms such as “merger”, “acquisition”, “buyout” and “takeover” are used interchangeable and are all part of the M&A parlance, but was quick to point out the differences when the described merger as the process whereby corporations come together to combine and share their resources to achieve common objectives with the shareholders of the merged firms still retaining part of their ownership and this may sometimes lead into a new entity being formed while acquisition resemble more of an arm’s-length deal, with one firm purchasing the assists or shares of the other and the shareholders of the acquired firm ceasing to be owners of the new firm.  

Apart from the three foreign owned banks that survived the consolidation  reform exercise, there is a considerable modification of the ownership structure of the banks; ownership is now widespread and better diversified. The emergent well diversified ownership structure promotes better corporate governance as banks can now be subjected to discipline from the capital market CIBN 2008; Ekundayo, 2008). With over a US$1 billion Tier 1 capital, some Nigerian banks can now compete favorably with their counterparts from other parts of the world Soludo, 2008 Basic indicators in the Table  below show that Nigeria banking is coming out stronger compared to what it used to be.
Table Basic Indicators of Banking Sector Consolidation Results

Pre- consolidation 2004
Post- consolidation 2006
Growth (%)
Number of banks
Number of banks branches
Total assets base of banks (N’Billion)
Capital and reserves (N’ Billion)
Industry capital adequacy ratio (%)
Ratio of non – performing credit to total (%)
Source: central bank of Nigeria. Abuja
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