Impact of Banking Sector Consolidation on the Performance of Nigerian Economy

This paper examines the impact of banking sector consolidation on the performance of Nigerian Economy. The major trust of this paper is to see how the consolidation of the banking sector affected the performance of the economy. The study used both primary and secondary sources for data collection, which were manly obtained for the 21 Deposit Money Banks (DMBs) operating in the economy during the period 2006 to 2011. The paper adopts the use of Ordinary Least Square in the analysis. It was found that the there is a bidirectional relationship of the variables used in the study mainly Deposits, Loans and Advances, Investment and Total Assets of the Banks to Economic Growth, which is a prelude to economic development. On the other side, we found unidirectional relationship of GDP to banking sector contribution to Nigerian Stock Exchange and to economic growth, as a whole. The results prove that banks consolidation policy had positively impacted on the growth of the Nigerian economy. It is recommended that government should catch up with the technological advancement in the Stock Exchanges of developed and emerging economies so as to restore the confidence of local and foreign investors to the banking industry for the industry to continue to serve as the engine of growth and development for the Nigerian economy. The government should also consider the need to review the supervisory and regulatory roles of its relevant agencies (CBN, NDIC, SEC, etc) to catch up with what obtains in economies whose banking industries are doing very well in ensuring sustainable economic development, especially on the monitored finances and granting of loans restriction to the real sector.