The Impact of Bank Consolidation on Credit Availability to Small and Medium Enterprises in Nigeria

The trend of collapse and continual closure of business by Small and Medium Enterprises (SMEs) in Nigeria due largely to financial constraint has raised the important question of whether or not bank consolidation really impacts on the sector. Using an aggregated data for all the Deposit Money Banks (DMBs) in Nigeria as at the end of 2008, this paper assesses the impact of bank consolidation on credit availability to SMEs in Nigeria. The results of the ordinary least squares (OLS) regression model show that so far, bank consolidation in Nigeria has no positive impact on the size of credit available to SMEs. Based on that, the paper recommends that the Federal Government should come up with more realistic and realisable schemes that will enhance accessibility of SMEs to finance, taking into consideration the peculiarities of the sector and the reasons responsible for the failure of previous financing schemes. The Central Bank of Nigeria (CBN) on her part should review the minimum capital base of N25 billion for banks and classify banks into international, national and regional to enable the emergence of small and medium-sized banks that will concentrate on SMEs financing.