Title  page




Table of content



1.1    Background of the study

1.2         Statement  of the problem

1.3         Justification of the study

1.4         Objective of the study

1.5         Scope of the study

1.6         Relevance of the study

1.7         Definition of term



Literature  review

2.1            The roles of bank in Nigerian economy

2.2            The nature of bank distress.

2.3            Modes of bank merger

2.4            Source of value in bank merger

2.5            Efficacy of  merger ad acquisition for bank distress

2.6            Justification for the establishment of deposit insurance scheme

2.7            Function of the  corporation

2.8            Benefits of deposit insurance in Nigeria



Research  methodology

3.1            Types  of data

3.2             Methods  of data collection

3.3             method of data analysis

3.4            hypothesis testing

3.5            statement of hypothesis

3.6            historical background of NDIC




4.0            Introduction

4.1     Operational activities of the corporation

4.2            Other activities of the corporation

4.3            Assessment of the effectiveness of NDIC’S role is merger and acquisition in bank distress resolution

4.4            Hypothesis and data  testing



5.1            Summary

5.2            Conclusion

5.3            Recommendation





The advent of banking system in Nigeria dated back to 1892 when the  Africa banking corporation opened its first branch in Lagos. as a result of initiative taken  by Messer Elder Dempster and co: a shipping firm based in Liverpool the main motivation for opening the bank was to finance the shipping business of Elder Dempster and company that operated between Liverpool  and west cost of Africa; this led to the format of the British  bank of west Africa in 1893 with N10,000 capital was  later increased to N100,000 capital, which was better increased during the same year. It was registered in London as a  limited in 1894 and started operation in Lagos in the same year. Later, the responsibility of operating the west Africa corrency board was entrusted to the  bank. The  bank as an agent of the board, received, stored and issued the west Africa sliver coins in exchange for sterling coin or London  drafts.


Other branches were opened in major west Africa cities like Accra,  Freetown, etc. British  bank of west Africa oepend it second Nigeria branch in old Calabar in 1970.


In 18999, another bank called Anglo-Africa bank was established in old calabar by the Royal Niger Company (now united Africa company UAC) to complete with British bank taken over of BBWA in 1921 due to the fierce competition and the monopoly of the  importation of sliver from the Royal mint enjoyed by BBWA. 


The British bank of west Africa changed its name to bank of west Africa in 1957, Africa Ghana gained her independence. In 1965, the  bank of west Africa further assumed the name standard bank, having merged with the stand chartered bank of London. Later in 1979, the  name of the bank was change to first bank   of Nigeria  limited. After the  government acquired sixty percent (60%) shares of the  company. Sequel to the  indigenization policy of the government.


In 1916, another, bank, the colonial bank was established in Nigeria. This bank was later taken over by the bareday’s bank DC & O ( Dominion, colonial and overseas), which later changed its name to  union bank.

Another foreign bank, the British and French bank for commerce and  industry was established and  later  changed its name to British and French bank and later in 1961, the name was changed to united bank for Africa limited.


Due to the  domination of foreign bank in Nigeria in 1929, the industrial and commercial bank was set up  a handful of patriotic Nigerians. As a result, between the period of 1933, about two hundred (200) banks were registered with a large percentage of them being indigenous banks. However, the indigenous bank that were established first folded up; this was as a result of an attempt to create fierce competition with expatriate banks.





Despite the fact that up to one hundred and eight-five (185) banks were established between 1947 and 1952 only four (4) banks survived. These banks includes, the national of Nigeria established in 1933, Abgonmagbe bank establishment in 1954 which were later know as  Wema bank  ( a private indigenous bank establishment by chiefe OKUPE). The Africa continental bank established in 1947 and founded by chief Nnamdi Azikiwe and the British  and French bank an expatriate bank now called united bank for Africa. As stated I the above paragraph, most of indigenous banks flailed due to bad management, lack of patronage, fraud, under capitalization,  huge load debts etc. the  high   rate of bank failure and the need to protect depositors of these banks led to  the appointment of Mr. P. Paton to Enquirer into the  conduct of banking business in  Nigeria. As a result of the paton report 1948, the enactment  of the first banking ordinance which provided for  minimum capital requirements was made; this led to the collapse of more indigenous banks. However, the period before this  has been described  as the free banking era. Inspite of the paton repot and the enactment  of the banking ordinance of 1952, banks were still indulging in some mal-practices which the  act could not effectively control. Therefore, the necessity of establishing a  central bank of supervise and control banks became more apparent and pressing. Thus, the central bank of Nigeria  came into being in 1959, which led to the increase of banking supervisions  CMD control and substantially curtail the mal-practice prevalent in the  system. Subsequent amendment of the CBN act of 1959 lightened the  grip of the central  bank over the commercial banking institutions. Others legislation include; 1958 ordinance, the 1961, 1962 amendments and the 1969 banking Decree. As a  result, the capital requirement especially for foreign banks were doubled from N200,000 under the 1952 act to N400,000 and was again increased to N1.5 million  in 1969, from this period upwards though the policy objectives were to ensure sound banking practices and to protect customers, the control instrument became restrictive (Ebhodaghe 1993 and Adekanya 1986). Due to the imperfections in the system of credit allocations, the cost of credit and the intermediation process generally, the  federal government  introduced wide range of reforms in the banking system from 1986 as part of the general deregulation of the economy in the direction of market determine of pricing. The  structural adjustment programme (SAP) was  designed to alter the structure and operational mechanism of the financial system among other objectives. The reforms also made possible for the free study entry of more commercial and merchant bank into the system. As at 1992, a total of 121 bank (66 commercial and 55 merchant) were established the increased competition for deposit created  room for new products to be introduced into the  market as a result of the universal banking system. Recently, the 7 clearing  banks in the country has made it  mandatory for all existing banks in the  entry country to reshape their financial  position and from time to time examine their capital adequacy. These 7 banks are: Zenith bank Plc, United bank for Africa Plc, union Banks Plc, first bank Plc, Wema bank  plc, Afribank Plc, and Standard Trust bank Plc. Thus any bank (s) found on the verge of distress.


A & 4 given among various  options the opportunity to merge with another  healthier bank (daily punch vol 48 (20) April 26th 2004. 



The call  for merger modality to sustain the  liability of the banking industrial is of paramount importance in Nigeria. These  researches seek to answer the following questions;

-                     How cost effective is merger and acquisition option in lieu of other bank distress resolution option (deposit  pay-off deposit transfer, purchase  and assumption of control etc.).

-                     How feasible and effective is the merger an acquisition option  as a strategy for growth and sustenance of the banking industry.

-                     Is merger and acquisition the best panacea for bank distress resolution.

-                     In what ways has the Nigeria deposit insurance corporation   (NDIC) has managing the distress is the banking industry?

-                     How effective  has the Nigeria deposit insurance corporation  (NDIC) been a supervisory and regulatory authority in the banking system.



The deregulation of the banking industry in the late 80s brought about an increase in the number of banking institutions with competition. Each bank was struggling to increase its market share and profitability to keep afloat the shock created by the deregulation in a bid to avert distress. But, contrary to the expectations of some financial analysts,  the industry was plunged into an acute financial distress, which led to the failure of some banks.


The thought of establishing the  Nigeria insurance corporation is an indication that the probems arose from the liberalized licensing of banks and other deposit taking institution in the banking industry could be better managed and returned the lost public confidence into the system. Hence, the corporation came into existence to managed the problem through effective financial crisis management and risk aversion.


This stdy is primarily based on the feasibility of   merger and acquisition in the banking industry as a bastion of hope in lieu of liquidation and to checkmate the realities of bank distress and failures. The study also aims at contributing to the improvement of banking industry by demonstrating the practicability and efficacy  of merger and acquisition as a strategically option for corporate growth and sustenance.



The general objective of the study is to critically analysis the feasibility and efficacy of merger and acquisition as a bank distress resolution option. The specific  objective are;

-                     To  examine the practicability of merger and acquisition as a strategically option for bank  growth and sustenance.

-                     To examine the cost – effectiveness and cost benefit analysis of merger and acquisition option.

-                     To examine the different ad best resolution option available to the Nigeria Deposit insurance corporation (NDIC).

-                     To examine the impact of Nigeria  deposition  insurance corporation    in managing distress.

-                     To make recommendation based on the data analysed and finding there from.



This study covers the in depth analysis of the impact of the NDIC on the control of distress in banking system and the efficacy of merger and acquisition as a resolution option to  prevent  back failures in Nigeria and the feasibility in Nigeria.


The duration of the study is limited to (1990 – 2002) when there was acute financial crisis and commencement of operations of NDIC.



The relevant of these study is to enhance and recommend way by which  merger and acquisition acna reduce the wave of distress in the banking industry and the deposit protection scheme of the Nigeria deposit insurance corporation  (NDIC0 can be sustained by public confidence. 


The NDIC is an independent body and acts as an additional regulatory authority in the supervision of bank to ensure compliance with regulation aims at ensuring bank solvency. The NDIC can also arrange for other bank to assume the deposit liabilities of a distress in the banking sector or take over the management of a bank where such action becomes necessary to protect depositors interest.



1.    Merger: This is the joining of two or more companies or firms together.

2.    Deposit insurance: This is the financial guarantee instituted as a  measure of safety for the banking system to protect depends.

3.    Profitability: Means the ability of a bank to generate sufficient revenue in excess of their  expenditure.

4.    Distress: This is the state of suffering caused by lack of money.

5.    Liquidity: This is the availability of ready money or cash to meet customer withdrawal.

6.    Safety: Refer to the assurance that the loan granted would be repaid at maturity.

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