Mergers and Acquisitions: It's Impact on the Performance of The Nigerian Banking Sector
Abstract
This study investigated the impact of mergers and acquisitions (M&As) on the performance of the Nigerian banking sector, covering the consolidation period from 2005 to 2024. An ex post facto research design was adopted, utilizing secondary data obtained from CEIC Data, Banks’ Annual Reports, Premium Times, and other National Dailies. The study examined the effects of M&As on financial performance, operational efficiency, market performance, and liquidity position of Nigerian banks. A combination of descriptive and inferential statistical techniques, including the Generalized Linear Model (GLM), was used for data analysis. Findings revealed that M&As have a positive and statistically significant effect on financial performance, as measured by return on assets (ROA), indicating improved profitability post-merger. However, operational efficiency declined due to integration challenges, suggesting that mergers may introduce inefficiencies, particularly in the short term. Market performance showed a positive but statistically insignificant impact, implying that while M&As can enhance competitive positioning, they do not necessarily translate into substantial market expansion. Additionally, the liquidity position of merged banks exhibited a negative but statistically insignificant effect, indicating possible short-term liquidity constraints due to integration costs. The study concluded that while M&As can enhance financial and market performance, they may also pose risks to operational efficiency and liquidity if not effectively managed. It recommended that banks implement strategic post-merger financial management, structured integration plans, and liquidity risk assessments to maximize the benefits of M&As. Furthermore, regulatory authorities should ensure effective supervision of merged entities to enhance financial stability. By addressing these critical factors, M&As can serve as a viable strategy for strengthening the Nigerian banking sector, fostering growth, and enhancing competitiveness in an evolving financial landscape.