This study assessed the Effect of Recapitalization in the Banking Sector- A case study of Skye Bank Plc.

Based on the set objective of the study, structured questionnaire consisting of eighteen (18) closed ended questions in both Section A and B (2) open ended questions were developed and administered on hundred (100) respondents of the aforementioned case study, with which a total of 87 were completely filled and returned.

Hence, the methodology employed the primary and secondary methods (i,e questionnaire method, interview method, and library method).

However, from the analysis of the data generated and with the aid of chi-square method, the following findings were concluded:

There is a significant relationship between recapitalization of banks and productivity. Recapitalization of the banking sector has impact on the Nigeria economy.

Therefore, the study suggested that this research work should be more current, more challenging and useful. Hence, more research works should also be conducted in order to cover a wider scope.  project topics   final year project topics and research materials 


Title page                                                                                i

Certification                                                                            ii

Dedication                                                                              iii

Acknowledgement                                                                  iv

Abstract                                                                                  vi

Table of content                                                            vii



1.1    Background of the study

1.2       Statement of problem

1.3       Objectives of the study

1.4       Statement of Research Hypotheses

1.5       Research Questions

1.6       The Importance of the study

1.7       Scope of the study



2.1       What is Banking

2.2       What is Consolidation

2.3       Merger

2.4       Reason for Merger and Acquisition

2.5       Regulation of Merger and Acquisition

2.6       The Current Development in the Nigerian

Banking Industry

2.7       Why is Recapitalization Necessary to Improve

 the Economy

2.8       Why Merger and Acquisition

2.9       Reason for Merger and Acquisition



3.1       Introduction

3.2       Research Design

3.3       Study  Population

3.4       Sample Techniques / Procedure

3.5       Sample Size

3.6       Description of Research Instrument

3.7       Method of Data Analysis

3.8       Reason for Choosing Chi-square



4.1       Background information

4.2       Socio-Economic Characteristics is Sample Size

4.3       Research Questions

4.4       Test of Hypothesis



5.1       Summary

5.2       Major Findings

5.3       Conclusions  

5.4       Recommendations





The banking industry is very important in the economic development of any country. The banking industry or its development in Nigeria has experienced weakness during the growth from its infancy to the present state of development’ it has been exposed to all types of conditions ranging from banking failure to government legislations.

The banking in Nigeria stated as far back as 1892 when the African banking corporation was established in Lagos at the invitation of Elder Dempster Company. Probably arising  from the good performance of the African banking Corporation, another bank opened its branch office in Lagos in 1894. The bank of West Africa Limited now called First Bank of Nigeria Plc however, enjoyed the monopoly of banking business in Nigeria until 1916, when another colonial bank was established.  

In 1925, the assets and liabilities of this bank were taken over by a consortium of banks to form a new bank named Barlays  bank DCO and now changed to Union Bank for Africa, Arab bank, International Bank for West Bank of India, Bank of American and chase  Manhattan Bank.

This discriminatory attitude of those banks against indigenous people led to the establishment of the first indigenous bank in 1929, which went into liquidation in 1930, another indigenous bank, the Nigerian Merchant Bank was established in 1931 with an initial paid up capital of N3,400, but went into voluntary liquidation in 1936. However, in 1933, another indigenous bank institution was formed as National Bank of Nigeria with a nominal capital of N20,000. And due to its excellent performance twenty three indigenous banks were established between 1945 and 1960, out of which only three survived, namely; National Bank of Nigeria, Agbonmagbe Bank (Now Wema Bank Plc) and African Continental Bank Plc.

To the new Governor or Central Bank of Nigeria, excellent banking should embrace recapitalization to ensure that the banks have large capital and acquire large assets to meet up the policy shift. The policy’s agenda was to reposition the CBN (Central Bank of Nigeria) and the financial system for the 21st century, with the goal to consolidate and build upon the achievement  of the sector in the past decade and take the system  to greater heights.

To ensure that the first phase of the policy is carried out, the Nigerian. Banking system was consolidated through recapitalization with an option of merger and acquisition.

The second phase of the policy addressed the issue of diversification which includes programmes to encourage the emergences of regional and unit / specialized banks.

However, after the initial shock with which the bank executives received on the announcement of the policy by the CBN Governor, many banks have been announcing their plans for raising funds as capital towards meeting the deadline of 31st December 200 for the recapitalization programme as announced.  

At the initial stage of the announcement, fewer banks made known their plans to consolidate. Such consolidation led to mergers or acquisitions or a combination of both as recommended by the CBN, in addition to raising fresh capital in    the capital market via right issues. Private placements, public offers, intake of strategic  foreign core investor(s) among others.   

Consolidation arrangements by the involving banks at the signing of memorandum of understanding (MOU) led to the Birth of five mega banks. First consolidated Bank comprising of five banks (All State Trust Bank  Plc. Gulf Bank of Niger Plc, Hallmark Bank Plc, Lion Bank of Nigeria Plc and Universal Trust Bank Plc); Intercontinental Group comprising  of four banks (Equity Bank of Nigeria Ltd, Gateway Bank Plc, Global Bank Plc  and Intercontinental Bank Plc). Astra Bank comprising of (Assurance Banks Nigeria Ltd, First Atlantic Bank Plc, Guardian Express Bank Plc and Manny Bank Nigeria Plc); Sterling Bank comprising of (ETB International Bank Plc, Magumn Trust Bank, NBM Bank Ltd, Prudent Bank Plc and Trust Bank of Africa ltd). Finally Wema Bank Group Comprising (Fountain Trust Bank lc, Lead Bank Plc and Wma bank Plc).

However, some banks who met 25 billion naira capital base alone in this category are Zenith International Bank Plc, Standard Trust Bank Plc and Guaranty Trust Bank Plc whom also went ahead to acquire another Bank-Inland Bank Nigeria Plc. Also, First Bank of Nigeria Plc, Union Bank of Nigeria Plc and United Bank for Africa Plc often referred to as “the big 3” hope to meet the 25 billion naira capital based by the deadline of December 31st 2005.

Banks like First City Monument  Bank Ltd is targeting to have 30 billion naira  capital base. The current consolidation process in the banking sector might turnout to be the turning point of the Nigerian economy toward growth and development.


This research examine the effect of recapitalization in the banking industry on Nigerian economy. There is a general expression of dissatisfaction in many cases of performance evaluation in banking industry for the following reasons.

1. What necessitated the Nigerian banking system consolidation?

2. What are the challenges facing the Nigerian Banking?    

3. How viable is recapitalization of most banks who are still strangling to survive?


This research project aims at ascertaining the effect of recapitalization in the banking industry on Nigerian economy particularly Skye Bank Plc.


Hypothesis is a tentative statement of the truth put forward and used as a basis for further investigation by which they may be approved or disapproved. Hence, for the purpose of this  research to be achieved, the following  hypotheses will help verity the research statement.

1. Ho: There is no significant relationship between recapitalization of banks and productivity

Hi: There is a significant relationship between recapitalization of banks and productivity

2. Ho: Recapitalization of the banking sector does not have impact on the Nigerian Economy  

Hi: Recapitalization of the banking sector does not have impact on the Nigerian Economy  


This research work employed the use of questionnaire to source fro information on recapitalization as it affects banking industry. The questionnaire is designed, to a strict business point of view. The questionnaires are drawn up fro this study to cover the relevant areas of the study.


The significance cannot be overlooked. The banking sector no doubt plays a special role in the economy. The banks must be able to mobiles enough savings for financing  development activities in the economy. This role can only be actively performed, if the banks merge to meet up the capital base in delivering their services. In addition, with the prevailing economic circumstances and an upsurge in the numbers of Banks in the country, it became imperative for banks to merge, to avoid take – over. This will enable them market their services so as to remain viable in the competitive industry. Since banking market is gradually becoming buyers’ market it is for banks to merge and met the proposed capital base and even strive higher.   


This research is designed to cover Nigerian banking industry generally but with special reference to the Nigerian economy. It involves the use of merger and acquisition to force banks to consolidate so as to meet up the new capital base.




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