Legal Framework and Consequences for Mergers and Acquisitions in Nigerian Banking Industry

Abstract

Mergers and acquisitions have gained so much Currency and acceptance worldwide that many countries have embraced them in the promotion of their Economy, especially in the banking industry. Nigeria however, is not left out among countries that are involved in mergers and acquisitions.Mergers and acquisitions in the banking industry have highly protected both the depositors and bank workers in the event of a bank going into liquidation the depositors would not lose entirely. Bank workers no longer exercise undue exploitation over customers/depositors. In spite of numerous existing laws regulating banking activities, it was only in 2004-2005 that the then Governor of the Central Bank of Nigeria (CBN), Professor Chukwuma C. Soludo came up with the bold step of mergers and acquisitions that shook the financial institutions. Between 2004 and 2007 there were a flurry of mergers and acquisitions in the banking and insurance sectors of the economy. It is in the light of the heightened interest in corporate mergers and acquisitions in Nigeria, coupled with the recent enactment of the Investments and Securities Act (ISA) No. 29 of 2007 which repealed the Investments and Securities Act (ISA) No. 45 of 1999 (Cap 124, LFN 2004) that this dissertation seeks to examine legal framework for mergers and acquisitions in Nigeria’s banking industry.The study examined the legal framework for mergers and acquisitions in Nigeria banking industry, evaluating the effects of mergers and acquisitions on human and material resources, asset and liabilities sharing and shareholders. In addition, the impact of mergers and acquisitions in the banks and other companies in other to know whether the banking system competes and transforms from middle player to mega players since the introduction of mergers and acquisitions.Also, the roles of the financial institutions regulators to proactively stem banking failures and contributes to solving the problems in Nigeria banking sector was examined. The study strongly recommends that banks be categorized into small, medium and big, each with different authorized share capital base and minimum paid-up capital and the regulating laws harmonized. The study concludes by commending the efforts of the Central Bank of Nigeria (CBN) in the mergers and acquisitions strategic initiative and notes that with this, institutions that are involved in mergers and acquisitions can effectively perform their duties without fear or favour.