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© 2018 Conscientia Beam. All Rights Reserved. 

DEPOSITORS’ CONFIDENCE AND MERGERS AND ACQUISITIONS:  THE NIGERIAN 
BANKING SECTOR EXPERIENCE    

 

 

 Anthony Nzeribe 
NWAUBANI1+  
Vincent N. 
EZEABASILI2   

 

1Department of Banking & Finance, Michael Okpara University of 
Agriculture, Umudike Nigeria and Department of Banking & Finance,  
Nnamdi Azikiwe University, Awka Nigeria. 

 
2Department of Banking and Finance, Chukwuemeka OdumegwuOjukwu 
University, Igbariam Nigeria 

 
 

 
(+ Corresponding author) 

 ABSTRACT 
 
Article History 
Received: 15 October 2018 
Revised: 21 November 2018 
Accepted: 24 December 2018 
Published: 7 January 2019 
 

Keywords 
Mergers and acquisitions 
Depositors’ confidence 
Nigerian banking sector 
Deposit liabilities 
shareholders’ funds and bank 
distress. 
 

JEL Classification:  
G28. 

 
Nigeria implemented major financial reforms between 2004 and 2005 in which mergers 
and acquisitions became an imperative option for most of the deposit money banks to 
meet the new and hiked minimum capital base requirement. This study examined the 
impact of mergers and acquisitions (M&As) on depositors’ confidence in the Nigerian 
banking sector.  An ex-post facto research design was used with secondary data 
collected for twenty years.  The study covered all the deposit money banks in Nigeria 
within the period 1995-2015 with 2005 as a base year separating pre and post merger 
periods.  Multiple regression and paired student t-test approaches were employed to 
analyze the data with the aid of SPSS (20) software. The output yielded mixed findings. 
While M&As as proxied by dummy merger showed mostly positive and insignificant 
impact on confidence of depositors, they indicated positive significant impact when 
measured by shareholders’ funds - an alternate proxy.  The paired student t-test yielded 
significant positive impact on depositors’ confidence. Overall, the findings suggest that 
the mergers and acquisitions have positively and significantly impacted on depositors’ 
confidence in the Nigerian banking sector.  It is recommended inter-alia that banks 
should endeavor to further enhance  their shareholders’ funds while partnering actively 
with monetary authorities in pursuit of aggressive financial inclusion via innovative 
product offerings for cheap deposits and financial stability. This will further enhance 
the depositors’ confidence in the banking system.  
 

Contribution/Originality: The work is one of the very few studies which have examined the impact of mergers 

and acquisitions on depositors’ confidence in Nigeria banking sector and also of those whose findings suggest that 

mergers and acquisitions have positive significant impact on confidence of depositors in the Nigerian banking 

system. 

 

1. INTRODUCTION 

The banking sector is considered as one of the leading contributors to the growth of global economy (Narwal 

and Pathneja, 2015). According to Nwaubani and Ezeudu (2015) the sector is the engine of growth in any economy.  

In the opinions of Adegboyega (2012) and Owolabi and Ajayi (2013) banks are the cornerstone of the economy of a 

country as they play a crucial role in propelling the entire economy. The sector is also seen from its essential role of 

intermediation which involves resource mobilization and allocation in an economy and, its position as the most 

important segment of the financial system in developing economies, accounting for the bulk of the financial 

transactions and assets (Moyo et al., 2014);(Ogunbiyi and Ihejirika, 2014). The industry has equally been described 

Financial Risk and Management Reviews 
2018 Vol. 4, No. 1, pp. 34-48 
ISSN(e): 2411-6408 
ISSN(p): 2412-3404 
DOI: 10.18488/journal.89.2018.41.34.48 
© 2018 Conscientia Beam. All Rights Reserved. 

 
 
 

 

 
 
 
 
 

https://orcid.org/0000-0002-4767-6759
https://www.doi.org/10.18488/journal.89.2018.41.34.48


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35 

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as critical to the success of global economies (Iacobelli, 2017). Thus, it is imperative that the banking system should 

be healthy in order to fulfill its varied roles.  

Nigeria implemented major financial reforms between 2004 and 2005. The reforms incorporated mergers and 

acquisitions as a strategy to enable deposit money banks to meet their new and hiked regulatory minimum paid 

capital base under banking reforms component. Prior to those banking reforms the Nigerian banking system was 

faced with a lot of serious challenges namely:- distress, illiquidity, board squabbles, insider- dealings, rumors of one 

bank or the other going distress and fears that some banks would be liquidated among others (Afolabi, 2011; 

Adebayo and Olalekan, 2012). Those challenges obviously eroded depositor’s confidence and created doubt and fear 

among the depositors and general public on the ability of many the banks to continue as going concerns (Appah and 

John, 2011). The depositors were living in fear of loss of their funds in the banking system.  Indeed a banking 

system which depositors could trust was clearly missing as the existing system was very unstable and marginal 

(Soludo, 2004).  

A banking system which depositors can trust is very crucial to a sustainable banking system because banking 

business is majorly driven by public confidence the absence of which breeds crisis of confidence and bank runs 

(Eboreime, 2009). In a bid to turn around the Nigerian banking system to one which would command the 

confidence of the general public and the depositors, the banking reforms were implemented with the banks being 

required to raise their capital base from 2billion naira (US $17.7 million) to 25 billion naira (US $184 million) by 31 

December 2005 or merge their operations with those of other banks (Panapress, 2004).  Mergers and acquisitions 

were extensively employed by the deposit money banks to raise the new minimum paid capital base. The number of 

banks was trimmed from 89 to 25 at the end of the 2015 (Soludo, 2006).   

Some empirical studies have been carried out on various aspects of the mergers and acquisitions.  The problem 

is that most of the studies focus on synergy and efficiency achieved by the banks in the post merger era. Studies on 

impact of the mergers and acquisitions on depositors’ confidence are very scanty and with conflicting findings. For 

instance while (Appah and John, 2011) finding is that despite the mergers and acquisitions of banks in the  country, 

some of the merged banks are still facing the challenges that led to the 2005 consolidation,  the outcome in 

Ugwuanyi (2014) is suggestive that the 2005 banking reform has corrected the erosion of public confidence 

witnessed before the reform.   Also some years after the mergers and acquisitions, about 65% of cash in circulation 

is said to be still outside the banking system by 2011 (CBN, 2011). Again we still have rumors and speculations that 

―some banks in the country may have gone or may be going into distress‖ (CBN, 2011). The rumors are so strong 

that Central bank of Nigeria has to issue a press release to deny that some banks are going distress. Again 

according to Enhancing Financial Inclusion Access, EFInA (2015) 39.7% of the adult population in Nigeria by 2012 

has no formal access to banking services. These facts raise doubt about the impact of the mergers and acquisitions 

on the confidence of the depositors and the general public in the Nigerian banking sector and thus constitute the 

key motivations for this study. 

 

2.  OVERVIEW OF MERGERS AND ACQUISITIONS: WORLD PERSPECTIVE 

In recent decades the concept of mergers and acquisitions has dominated national and international fora. In a 

simple sense, a merger refers to a combination of two or more companies into one larger organization (Ailemen and 

Oyero, 2013; Olugbenga and Olusola, 2014). It is can also be seen as the coming together of two entities to form a 

completely new company (Uremadu, 2004). A merger can equally be explained as the result of a process whereby 

two or more previously autonomous concerns come under common control (Odetayo et al., 2013) while acquisition 

takes place where entity A acquires all the shares of entity  B and A continues to exit while B disappears (Mcclure, 

2014). The terms mergers and acquisitions are usually used interchangeably to refer to transactions involving the 

combination of at least two independent firms to form one. In this study the terms are used interchangeably.  On 

the other hand consolidation occurs when two companies combine to form a new enterprise altogether, and neither 



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of the previous companies remains independently while a merger via absorption according (Pandey, 1998) is a 

combination of two or companies into an existing one with all the existing companies except one losing their 

individual identities. At the global level mergers and acquisitions activities have been on the rise though the global 

volume declined by 17%  in 2016  with total value of  $3.6 trillion as against $4.34trillion in 2015 (Roumelioti and 

Lewis, 2016) China recorded the highest cross-border deals worth $221billion in 2016.  According to the authors, 

some of the notable deals documented in 2016 include:  AT&T and Time Warner - $86 Billion on October 22, 2016;  

Qualcomm and NXP Semiconductors - $47 Billion on October 27, 2016; Shire and Baxalta - $32 Billion- a 

announced in January 2016 but completed in June 2016; Abbott Laboratories and St. Jude Medical- $30.6 Billion in 

April 2016; Microsoft and LinkedIn - $26.2 Billion on August 1, 2016 among others. 

 

2.1. Mergers and Acquisitions: The Nigerian Perspective 

Some of the early merger and acquisition deals in independent Nigeria dates back to early1980s. According to 

Ogbochie (2011) between 1982 and 1988, the Securities and Exchange Commission (SEC) supervised 13 mergers- 

including the mergers of Lever Brothers Nig Ltd and Lipton Nigeria Ltd, SCOA Nigeria Ltd and Nigeria 

Automotive Components Ltd, John Holt Ltd and John Holt Investment Ltd  though two of them were unsuccessful. 

Also in 2002, there was a merger of two important petroleum companies; Agip Nigeria Plc and Unipetrol Plc to 

form Oando Plc (Ogbochie, 2011).   

The economic recession and challenges faced by Nigeria in 2016 in particular slowed down the tempo of 

mergers and acquisitions activities in Nigeria. Before 2016, the mergers and acquisitions activities in Nigeria were 

remarkable.   For instance, according to Egwuatu (2015) Nigerian Breweries Plc confirmed that its merger with 

Consolidated Breweries Plc had been finalized. Also shareholders of Lafarge WAMCO approved a $1.35billion deal 

combining its Nigerian businesses with Lafarge South Africa. The new entity would be called Lafarge Africa Plc. 

According to Chima (2013) KPMG Consulting reported that, mergers and acquisitions (M&As) in Nigeria for 2012 

was worth $7.415 billion – a 379 percent rise from 2011’s figure of $1.548 billion. However it may be noted that it 

was the 2004/2005 regulatory induced banking consolidation that popularized the concept of mergers and 

acquisitions in Nigeria (Ogbochie, 2011).  

 

3. REVIEW OF THE NIGERIAN BANKING SYSTEM BEFORE THE 2004/2005 MERGERS 

AND ACQUISITIONS 

A review of the period before the 2004/2005 bank consolidation makes for better appreciation of factors that 

necessitated the employment of mergers and acquisitions in the Nigerian banking sector Meanwhile, evolution of 

banking in Nigeria may be traced through phases covering an era of free banking to the era of strict regulations. 

However, in Nzotta (2014) view, evolution of modern banking in Nigeria could also be classified into ten different 

phases as shown in Table 1below. 

 
Table-1. Evolution of banking in  Nigeria 

Phase   Date    Era 

First Up to 1952 Free Banking Era  
Second 1952-1959 Pre Central Banking Era 
Third  1959-1970  Banking Legislation Era 
Fourth  1970-1976 Indigenization  Era 
Fifth  1977-1985 Post Okigbo Era 
Sixth  1986-1992 Deregulation Era 
Seventh  1993-2001 Era of Banking Distress  
Eighth  2002-2004  Universal Banking Era 
Ninth  2004-2009 Bank Consolidation Era 
Tenth  2009-Date Segregated Banking Era 

                                              Source: Nzotta (2014) 

 



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According to Appah and John (2011) the evolution is seen via the following phases: embryonic, expansion, 

consolidation/reform and post consolidation era. The embryonic phase dates back to 1892 when the African 

Banking Corporation of South Africa established a branch in Lagos followed by the British Bank of West Africa in 

1894 while Barclays Bank DCO (Dominion, Colonial and Overseas) and the British and French Bank were 

established in 1925 and 1949 respectively. Indigenous banking in Nigeria commenced with the establishment of 

National Bank of Nigeria Limited in 1933, Agnonmagbe Bank Limited in 1945 and the African Development Bank 

limited in 1948. The expansion era commenced with the establishment of Rural Banking Scheme in 1977, Peoples 

Bank in 1989 and Community Banks in 1990.  The Consolidation phase began with the in 2004/2005 mergers and 

acquisitions of banks which trimmed the number of banks 89 to 25. The post-consolidation kicked off with the quest 

of the Nigerian banks to assume the status of mega and pan-African banks via cross border expansion and 

penetration.   

The expansion phase was a bag of mixed blessings for the Nigerian banking sector because of the crises that 

followed it. During the mid 1990s, there was growth in the number of banks and in addition to that, the financial 

sector witnessed the boom and bust cycle, which was characterized by financial liberalization with deregulation of 

interest rate and the loosening of credit allocation quotas. Consequently, there came the emergence of massive entry 

of new banks with specialized in foreign exchange operations and taking advantage of the price disparity between 

official and black market rates (Ailemen and Oyero, 2013). The banking sector then was characterized by distress, 

illiquidity, Board squabbles, inside dealings and fears that some banks were going to be liquidated and a myriad of 

challenges (Soludo, 2004; Afolabi, 2011; Okpanachi, 2011; Ugwuanyi, 2014). The beginning of the challenges could 

be traced to the financial deregulation in 1987 in Nigeria subsequent to the adoption of a Structural Adjustment 

Program (SAP) in 1986. The deregulation brought about high competition in terms of size and number of banks in 

operation.  However, the increased competition, amidst political instability and financial policy inconsistencies on 

the part of the financial regulators led to rapid decline in profitability of the traditional banking activities (Ailemen 

and Oyero, 2013). Thus, in a bid to survive and remain profitable in the face of political and policy instability, banks 

started taking excessive risks which led to frequent bank failures and related financial shocks in the economy  and 

the country suggesting an urgent call for a well thought out and comprehensive policy response.  

 

4. THE 2005 MERGERS AND ACQUISITIONS: THE CBN INTERVENTION 

The review of genesis of the challenges points to a serious need for government intervention in the Nigerian 

banking sector. Consequently, Consolidation of the banks’ operations through mergers and acquisitions was the 

preferred option. The choice of mergers and acquisitions was based inter-alia on the fact that mergers and 

acquisitions especially in the banking industry have enjoyed global acceptance (Soludo, 2004). Soludo gave instances 

of a merger in France in 1998 that resulted in a new bank with a capital base of US$688 billion, while the merger of 

two banks in Germany in the same year created the second largest bank in Germany with a capital base of US$541 

billion. He equally touched on emerging markets, including Argentina, Brazil and South Korea where consolidation 

had also become prominent, as banks strive to become more competitive and resilient to shocks as well as reposition 

their operations to cope with the challenges of the increasingly globalized banking systems. Thus, the 2004/2005 

mergers and acquisitions wave in the Nigerian banking industry(which started in October, 2003 under Professor 

Soludo- a former governor of Central Bank of Nigeria) was seen as the long awaited fundamental policy response to 

the numerous challenges confronting the banking sector in Nigeria.  

 

5. EMPIRICAL REVIEW 

Boboye  and Obisesan (2016) evaluated the effect of mergers and acquisitions on the performance of selected 

Deposit Money Banks in Nigeria for the period 2001- 2014. Profit after tax was used as the independent variable 

while shareholder’s fund, total asset, loan and advances, and total deposit were the explanatory variables.  The 



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Error Correction Model showed that long-run equilibrium relationship exits among the variables and that merger 

and acquisition has no significant impact on banks’ performance of the selected banks in Nigeria. Njogo et al. (2016) 

evaluated the impact of mergers and acquisitions on the performance of deposit money banks in Nigeria using a 

sample of ten (10) banks. Secondary data obtained from the bank’s annual reports covering a period of 2001-2010 

were analyzed using paired t-test. The relevant variables were Return on Assets, Return on Equity, Net Profit 

Margin, Asset Utilization, Equity Multiplier, Earnings per share, Debt Equity ratio, Debt Asset ratio and Leverage 

ratio. Findings showed significant positive impact with respect to ROA, ROE and LR but displayed no significant 

impact when measured in terms of the other selected variables.  

Ugwuanyi (2014) used aggregate deposit liabilities of all the banks in Nigeria over a period ten years (2001 to 

2010). The deposit liabilities were decomposed to their individual components of time deposits, demand deposits 

and savings deposits. To test for a significant difference the contributions of the decomposed deposit liability of 

demand, savings and fixed deposits to the total deposit liability of the Nigerian banking industry were evaluated for 

pre and post performances for the Nigerian banking industry using the parametric statistical pooled variance t-test 

model. Findings revealed that though there was no significant difference in the contribution of the demand deposit 

to the total deposit liability of the Nigerian banking industry after the 2005 banking sector reform, significant 

differences were observed in contributions of the time deposits and savings deposits to total deposit liabilities 

following the 2005 banking reform. The study therefore, concluded that the 2005 banking reform had restored 

public confidence in the Nigerian banking industry. Olayinka and Farouk (2014) evaluated the impact of 

consolidation on the performance of banks in Nigeria using secondary data obtained on four banks for the period 

2000 - 2011. The findings indicated that consolidation has significant positive impact on the performance of banks 

in Nigeria. Olugbenga and Olusola (2014) investigated the synergistic effect of the 2005 bank mergers and 

acquisitions in Nigerian banking industry against the position of economic theory which cited synergy as one of the 

many possible  reasons why mergers might take place. Using data from three Access Bank, Ecobank and FCMB 

from 2006 to 2012, the authors analyzed the data employing model and technique. Their result showed that of the 

three banks only one showed evidence of synergy in the growth of shareholders funds while others showed no such 

growth.   

Ailemen and Oyero (2013) employed panel data ordinary least squares approach to investigate effect of mergers 

and acquisitions on performance of  banks inn Nigeria using return on assets, asset base, deposit growth rate, the 

loans to deposit ratio and total value of shareholders funds as the critical indicators. The selected banks were:  

Access bank Plc, Diamond bank Plc, First City Monument bank, Fidelity bank Plc, First bank Plc, Intercontinental 

bank Plc, Oceanic bank Plc, United bank for Africa, Union bank, Wema bank Plc.  The evidence showed that 

mergers created synergy. The authors recommended that merger being a relatively new phenomenon in the 

Nigerian banking environment should be given more encouragement by the regulatory authorities.   

Odetayo et al. (2013) carried out an empirical analysis of the impact of merger on Nigerian banks’ profitability 

using secondary data of Access Bank and United Bank for Africa (UBA) between 2005 – 2012.  The study concluded 

that the 2005 mergers and acquisitions did not have significant impact on post merger profits of the two banks. It 

may be note that this finding might have been influenced by the very small sample size of only two banks out of 24 

banks then. Nwidobie (2013) examined impact of mergers and acquisitions on shareholders wealth maximization in 

Nigeria. The study used dividend per share and earnings per share from a sample of six commercial banks in 

Nigeria from 2003 to 2009 as proxies for shareholders’ wealth.   Findings from the paired t-test analysis showed 

that the mergers and acquisitions of 2005 created more wealth to the shareholders. Adebayo and Olalekan (2012) 

assessed the implications of mergers and acquisitions on profitability of commercial banks in Nigeria using survey 

design combining 95 questionnaires and secondary data/audited accounts of 10 randomly select banks. From the t-

test analysis, it was found out that the mergers and acquisitions have significantly influenced profitability of 



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commercial banks, earnings per share and dividend per share of shareholders.  Based on the findings, the study 

concluded that the mergers and acquisitions have significantly improved the overall performances of banks. 

Adegboyega (2012) evaluated the impact of mergers and acquisitions on performance of banks in Nigeria using 

pre-merger and post merger financial statements of two consolidated banks. Simple regression model was employed 

to express the relationship between consolidation proxied by shareholders funds(X) and performance represented 

by total assets(Y). Finding showed that there was strong relationship between shareholders funds and total assets 

in both banks leading to the conclusion that the bank consolidation in the Nigerian financial system increased 

shareholders’ funds, investor’s confidence, financial stability and operational efficiency of the banks. Owolabi and 

Ajayi (2013) examined the financial efficiency of banks in Nigeria in the post mergers and acquisitions period.  The 

findings suggested that the post-mergers and acquisitions period was more financially efficient. Okpanachi (2011) 

made a comparative analysis of the impact of mergers and acquisitions on financial efficiency of banks in Nigeria. 

The study used gross earnings, profit after tax and net assets of Access Bank Plc, First Bank of Nigeria Plc and 

Wema Bank Plc as indices to determine financial efficiency by comparing the pre-mergers and acquisitions’ 

performance with the post-mergers and acquisitions’ indices for the period of 2002 to 2008.   The findings revealed 

that the post-mergers and acquisitions’ period was more financially efficient than the pre-mergers and acquisitions 

period. However, to increase banks financial efficiency, the study recommended that banks should be more 

aggressive in their profit drive. Umoren et al. (2007) examined the impact of consolidation on performance of the 

mega banks and considered whether there had been considerable improvement on their profitability, liquidity and 

solvency. The sample consisted of Intercontinental bank Plc, Access bank Plc, Fidelity bank Plc, IBTC-Chartered 

Plc, Oceanic Bank Plc, Bank PHB Plc and United Bank of Africa Plc. Performance ratios of the banks were analyzed 

and  on average, the findings showed that bank consolidation resulted in improved performance. It was therefore 

suggested that the bank management should embrace broad product strategies, which could help in generating 

more income for the banks.   

Elsewhere outside Nigeria, Yeboah et al. (2015) evaluated impact of mergers and acquisitions on service quality 

of consolidated banks in Ghana.   A descriptive and explanatory design was adopted to describe customer perceived 

service quality and to also explain the relationship between M &As and service quality. ANOVA and T-tests 

techniques were used to analyze collected primary and secondary data. Findings revealed that mergers and 

acquisitions have had positive impact on overall service quality. Masud (2015) examined the impact of mergers and 

acquisitions on the financial performance of selected banks in Egypt namely:  Allied bank, NIB bank and Faysal 

Bank. Secondary data for the period 2000 -2012 were used while ratio analysis and paired t-test were employed for 

the analysis. The chosen performance indicators were ROA, ROE and EPS. The analysis yielded mixed findings- 

while some banks showed positive and significant impact others displayed negative impact. Badreldin and Kalhoefer 

(2009) examined the impact of mergers and acquisitions on performance of Egyptian banks for the period 2002-

2007. The study employed extensive ratio analysis of selected performance indicators of the different categories of 

banks involved in mergers and acquisitions. Findings indicated that mergers and acquisitions have not had a clear 

effect on the profitability of banks in the Egyptian banking sector. 

 

6. RESEARCH METHODOLOGY 

The research design adopted in this work is ex-post facto and the population is the entire deposit money banks in 

Nigeria within the period covered by the study. Secondary data collected from 2015 statistical bulletin of Central 

bank of Nigeria were used. The relevant data were annual aggregate deposit liabilities of the Nigerian banking 

sector decomposed to private sector deposits and public sector deposits respectively for the period covering 1995 to 

2015.  For the purpose of the paired student t-test, the period is categorized into pre mergers era of 10 years from 

1995 to 2004 and post mergers period of 10 years from 2006 to 2015 with 2005 as the base year.  Multiple 

regression approach (with ordinary least square method for estimating parameters) was employed in addition to the 



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paired student t-test with the aid of Statistical Package for Social Sciences Version 20 - SPSS (20). The adopted 

models follow the approach adopted in Ailemen and Oyero (2013) and Odetayo et al. (2013) respectively for the 

multiple regression analysis and the approach in Okpanachi (2011) for the paired student t-test. The general 

equation for multiple regression is given   as follows:  

Yi = 0+1iX1i+2X2i +…nXni + µi.   (Gujarati, 2006; Osuala, 2010)   …………………….(1) 

Where: 

Yi = the dependent variable(s) 

Xi = the independent variables 

0 = the intercept 

i =  the slope (beta) associated with Xi 

µi = Error/disturbance term 

This translates to an econometric equation expressed as follows: DCi = 0+1DM +2SFi + µi ….(2)                    

Where: 

DC      = the dependent variable representing depositors’ confidence 

DM     =  dummy merger dummy (Ailemen and Oyero, 2013) 

SF       =   shareholders’ funds (Odetayo et al., 2013) 

                  

This implies that, depositors’ confidence is a function of merger and acquisitions: DC =   (mergers and 

acquisitions) where mergers /acquisitions is proxied by dummy merger and shareholders’ funds translating to:  

depositors’ confidence =         . Depositors’ confidence is measured by the aggregate private sector deposits, 

aggregate public sector deposits and overall deposits held by the deposit money banks in Nigeria (Ugwuanyi, 2014).  

   

6.1. Paired Student T-test Model 

Under this second model, hypotheses were tested using paired student t-test for unequal variances. The   

relevant paired   student   t-test model for unequal variances used in this study is given   as               

(3) 

       

………………………………………………………………………...(3)                  

   

 

 

Where:      

T =  the t-test statistic  

S = the Standard deviation for the paired data,   

 n = the sample size/number of years 

and Ȳ are the respective means of the pair of  data in X and Y  group/periods, and in the case   of   this   study:  

pre  merger  period  and  post  merger  era  respectively.    

A paired t-test is used to compare two population means where there are two samples in which observations in 

one sample can be paired with observations in the other sample (Shier, 2004).  

 

7. DATA PRESENTATION AND ANALYSIS 

A look at Table 2 clearly shows an upward trend among the categories of deposit liabilities and the 

shareholders’ funds particularly from 2006 following successful mergers and acquisitions completed in 2005.  

Figure 1 above graphical confirms this trend. However, PUD(green) exhibits a nose-dive in 2014 most likely 



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because of governments campaign/election- related  spending for the 2015 general elections in Nigeria while 2015 

is affected by Treasury Single Account Policy took off from 2015. 

 
Table-2. Categories of deposit money bank deposits, total deposit liabilities and shareholders’ funds in Nigeria (1995-2015) (All figures except 
DM are in =N= billions). 

Year PRD PUD   TDL  DM* SF 

1995 166.3              8.7                182.4 0 43.2 
1996 205.1              9.6                220.4 0 55.6 
1997 257.2            17.5                280.1             0 73.9 
1998 291.6            26.2                327.1 0 101.4  
1999 420.7            61.2                516.8   0 142.0 
2000 454.2          119.7                775.9  0 196.7 

2001 872.8            55.7                975.5   0 364.3 
2002 1,000.7         100.0              1,209.7    0 500.8 
2003 1,170.8         123.7              1,417.1       0 537.2 
2004    1,429.4         176.7              1,778.7 0 688.1 
2005 0 0        0  0 0 
2006 2,836.8         240.0              3,379.3 0 1,389.0 
2007 4,379.7         401.8              5,256.0  0 2,225.0 
2008 6,629.7         669.0              8,252.7    0 3,365.0 
2009 7,254.1         903.5              9,601.8  0 4,931.0 
2010 7,676.2       1,428.6            10,610.0  0 2,218.0 
2011 7,368.2       2,798.7            12,136.0   0 3,682.0 

2012 9,585.1       1,933.1            14,245.0  0 3,638.0 
2013 9,329.0       3,968.3            16,699.0   0 3,870.0 
2014 11,743.5       1,245.2            16,824.0 0 4,334.6 
2015 12,233.9       1,610.2            18,201.1 0 4,901.9 

Source:  2015 CBN Statistical Bulletin. Note: PRD stands for all private sector deposits, PUD ►public sector deposits, TDL ► total deposit liabilities of the banks 

and SF ► shareholders funds. * Values of 1s and 0s were assigned to the Dummy Mergers (DM). 

 

 
Figure-1. Trends of Private Sector(PRD), Public  Sector(PUD), Total Deposits(TDL) and capital base(SF) before and after M &A. 

          Source: SPSS (20) Graphics, 2017 

 
 
 



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Table-3. Categories of total deposit- pre merger and post merger periods 

Pre – merger period Post –merger period 

 Private  
sector 
(PRD) 
=N=bn        

Public  
sector 
(PUD) 
=N=bn         

Total   
deposit 
(TDL) 
=N=bn 

Year Private  
sector 
(PRD) 
=N=bn        

Public  
sector 
(PUD) 
=N=bn         

Total   
deposit 
(TDL) 
=N=bn 

1995 166.3              8.7           182.4        2006 2,836.8 240.0 2,379.3 

1996 205.1              9.6           220.4 2007 4,379.7 401.8 5,256.0 
1997 257.2            17.5            280.1 2008 6,629.7          699.0 8,252.7 

1998 291.6            26.2            327.1 2009 7,254.1          903.5 9,601.8 
1999 420.7            61.2            516.8   2010 7,676.2       1,427.6 10,610.2 

2000 454.2          119.7            775.9 2011 7,368.2        2,797.7 12,131.5 
2001 872.7            55.7            975.5 2012 9,585.1        1,933.1            14,245.1 

2002 1,000.7          100.0         1,209.7 2013 9,329.0        3,968.3            16,699.4 
2003 1,170.8          123.7         1,417.1         2014 11,743.5       1,245.2            16,824.0 

2004 1,429.4          176.7         1,778.7 2015 12,233.9       1,610.2             18,201.1 

Average 626.9            69.9 768.4     Average 6,227.6      1,301.3              8,781.1 

As % of TDL 81.6%  9.1%                 -   As % of TDL 70.9%    14.82%    - 

Source: Authors’ computations from 2015 CBN statistical bulletin 

 

From table 3 Private Sector Deposit (PRD with average volume of N626billion constituted 81.6% of the total 

deposit liability of the deposit banks in the pre mergers and acquisitions period while the contribution declined in 

the post merger period by 10.7%  to stand at 70.9% . Though in absolute terms, PRD average volume shot from less 

than N1trillion in the pre merger era to over N6trillion in the post merger period( 893% jump), the reduced 

contribution to total deposit should be a source of concern to the banks and the monetary authorities. Private sector 

provides the right platform for the much needed domestic savings for stable and relatively cheap funds thus the gap 

in their contribution to total deposit should be of concern to the banks and the monetary authorities in Nigeria. 

This concern appears stronger in view of Federal government Treasury Single Account (TSA) by which all 

governments’ funds are swept to and maintained by Central bank of Nigeria from September 2015. The rise in the 

contribution of public sector deposits to total deposits  in the post merger era to 14.82% from 9.1% in the pre 

merger period (5.7% change) seems not sustainable in view of the TSA.  It appears that the private sector have not 

been encouraged enough by the commercial banks via innovative product offerings to meet their pre merger quota. 

It may be noted that generally, before the TSA policy, public sector deposit balance was affected by occasional 

sweeping of government funds from deposit money banks to Central Bank of Nigeria as part of monetary policy 

measures of the Central Bank of Nigeria. The pre merger average balance must have been affected by the 

withdrawal of the funds of the three tiers of government from the deposit money banks in July 2004 before the 

banking consolidation.  Overall, the negative impact of the 2007/2009 global financial meltdown on the post 

merger balances should as well be taken into account. 

 

   Table-4.  Schedule of shareholders funds:  pre and post merger periods 

Year 

Pre-merger (=N=billion) Year Post-merger (=N=billion)   

1995 43.20 2006 1,338.90 

1996   55.60 2007 2,225.40 
1997 73.90 2008 3,364.70 
1998 101.40 2009 4,930.60 
1999 142.00 2010 2,217.80 
2000 196.70 2011 3,682.10 
2001 364.30 2012 3,637.70 
2002 500.80 2013 3,869.70 
2003 537.20 2014 4,334.60 
2004 688.10 2015 4,901.90 

Average                270.32 Average 2,888.14 

Source: Authors’ computations from 2013 CBN statistical bulletin 

 



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Table-5.  Summary of  Regression Results of the Variables of the Study 

Dependent Variables 

Independent PRD PUD TDL PUD2 

Variables      (Hypothetical) 

DM-t statistic 0.824 0.421                0.280 -0.839 
DM Prob (t-statistic) 0.421 0.679 0.783 0.413 
DM Beta 0.127 0.150 0.051 -0.249 
SF  t-statistic 5.437      1.713 4.917 3.527 
SF  Prob ( t-statistic) 0.000 0.104 0.000 0.002 
SF Beta 0.841   0.608 0.894  1.046 

R Squared        0.915        0.555                  0.883  0.689 

Adjusted     0.906 0.506                  0.870 0. 655 

F-Statistic 97.443                 11.224                68.052 19.97 
Prob (F-statistic) 0.000 0.001 0.000 0.000 
Durbin Watson 1.896 1.594 1.320 1.045 

Source: Result of Regression Analysis using SPSS (20). Where: 
PRD, PUD, and TDL are private sector deposit, public sector deposit and total deposit liabilities respectively. 
Note: The full details of the regression results are on Tables6 - 9 below. 

 

From Table 4.3 above, it could be seen that average shareholders’ funds jumped sharply from N270.32 billion 

to about N2.89 trillion in the post-merger period. This represents about 968% increase and is attributed to 

increased recapitalization consummated through the mergers and acquisitions. The performance obviously would 

have been better than this without the negative effect of the 2007-2009 global financial crises. 

 

Table-6. Results of  the Multiple Regression Analysis for Private Sector Deposit(PRD) 

                                                               Private Sector Deposits (PRD) 

Model Summaryb 

Model R R Square Adjusted R 
Square 

Std. Error of 
the Estimate 

Durbin-
Watson 

1 .957a .915 .906 1305.38817 1.896 
a. Predictors: (Constant), SF, DM 
b. Dependent Variable: PRD 

 

ANOVAa 

Model Sum of 
Squares 

Df Mean Square F Sig. 

1 
Regression 332088539.519 2 166044269.759 97.442 .000b 
Residual 30672688.993 18 1704038.277   
Total 362761228.511 20    

a. Dependent Variable: PRD 
b. Predictors: (Constant), SF, DM 

 

Coefficientsa 

Model Unstandardized 
Coefficients 

Standardized 
Coefficients 

t Sig. 95.0% Confidence 
Interval for B 

B Std. Error Beta Lower 
Bound 

Upper 
Bound 

1 
(Constant) 89.565 403.384  .222 .827 -757.913 937.043 
DM 1060.142 1287.223 .127 .824 .421 -1644.212 3764.497 
SF 1.955 .360 .841 5.437 .000 1.199 2.710 

a. Dependent Variable: PRD 
Source:  SPSS (20) Output, 2017 

 

 

 

 

 



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Table-7. Results of  the Multiple Regression Analysis for Public Sector Deposit(PUD) with Election Spending- ES 

(2014) and Treasury Single Account-TAS(2015) 

  Public Sector Deposits (PUD) with ES & TAS 

Model Summaryb 

Model R R Square Adjusted R Square Std. Error of the 
Estimate 

Durbin-
Watson 

1 .745a .555 .506 754.54458 1.594 
a. Predictors: (Constant), SF, DM.              b. Dependent Variable: PUD 

 
ANOVAa 

Model Sum of 
Squares 

Df Mean Square F Sig. 

1 
Regression 12780234.939 2 6390117.470 11.224 .001b 
Residual 10248075.313 18 569337.517   
Total 23028310.252 20    

a. Dependent Variable: PUD.     b. Predictors: (Constant), SF, DM 

 
Coefficientsa 

Model Unstandardized 
Coefficients 

Standardized 
Coefficients 

T Sig. 95.0% Confidence 
Interval for B 

B Std. Error Beta Lower 
Bound 

Upper 
Bound 

1 
(Constant) -23.953 233.165  -.103 .919 -513.815 465.909 
DM 313.467 744.044 .150 .421 .679 -1249.712 1876.647 

SF .356 .208 .608 1.713 .104 -.081 .793 
a. Dependent Variable: PUD 

Source:  SPSS (20) Output, 2017 

 

Table-8. Results of  the Multiple Regression Analysis for Total Deposit Liabilities (TDL) 

Total Deposit  Liabilities (TDL) 

Model Summaryb 

Model R R Square Adjusted R 
Square 

Std. Error of the 
Estimate 

Durbin-
Watson 

1 .940a .883 .870 2319.46909 1.320 
a. Predictors: (Constant), SF, DM.    b. Dependent Variable: TDL 

 

ANOVAa 

Model Sum of Squares Df Mean Square F Sig. 

1 
Regression 732231386.747 2 366115693.373 68.052 .000b 
Residual 96838863.506 18 5379936.861   
Total 829070250.252 20    

a. Dependent Variable: TDL.       b. Predictors: (Constant), SF, DM 

 

Coefficientsa 

Model Unstandardized 
Coefficients 

Standardized 
Coefficients 

t Sig. 95.0% Confidence 
Interval for B 

B Std. Error Beta Lower 
Bound 

Upper 
Bound 

1 
(Constant) -73.340 716.749  -.102 .920 -1579.175 1432.494 
DM 640.654 2287.192 .051 .280 .783 -4164.557 5445.866 
SF 3.141 .639 .894 4.917 .000 1.799 4.483 

a. Dependent Variable: TDL 
Source:  SPSS (20) Output, 2017 

 

 

 

 

 



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Table-9. Alternative (Hypothetical) Regression Result on Public Sector Deposit-PUD Without Election Spending( ES) and Treasury Single 

Account in 2014 and 2015 Respectively 

PUB without   ES & TSA 

Model Summaryb 

Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson 
1 .830a .689 .655 882.03275 1.045 
a. Predictors: (Constant), SF, DM 
b. Dependent Variable: PUD 

 

ANOVAa 

Model Sum of Squares Df Mean Square F Sig. 

1 
Regression 31068016.980 2 15534008.490 19.967 .000b 
Residual 14003672.038 18 777981.780   
Total 45071689.018 20    

a. Dependent Variable: PUD 
b. Predictors: (Constant), SF, DM 

 

Coefficientsa 

Model Unstandardized 
Coefficients 

Standardized 
Coefficients 

t Sig. 95.0% Confidence 
Interval for B 

B Std. Error Beta Lower 
Bound 

Upper 
Bound 

1 
(Constant) -147.015 272.561  -.539 .596 -719.644 425.614 
DM -729.393 869.759 -.249 -.839 .413 -2556.688 1097.902 
SF .857 .243 1.046 3.527 .002 .346 1.367 

a. Dependent Variable: PUD 
Source: SPSS (20) Output, 2017 

 
Table-10. Results of Analysis Under Paired Student t-test 

Paired Samples Test 

 Paired Differences T df Sig.  
(2-tailed) Mean Std. 

Deviation 
Std. Error 
Mean 

95% Confidence Interval 
of the Difference 

Lower Upper 

Pair 1 
PRDPRM – 
PRDPOM 

-7276.75000 2546.55516 805.29145 -9098.44582 -5455.05418 
-
9.036 

9 .000 

Pair 2 
PUDPRM – 
PUDPOM 

-1452.74000 1114.38454 352.39933 -2249.92268 -655.55732 
-
4.122 

9 .003 

Pair 3 
TDLPRM – 
TDLPOM 

-
10651.74000 

4703.16267 1487.27063 
-
14016.17990 

-7287.30010 
-
7.162 

9 .000 

Note: PRDPRM→private sector deposit(pre merger), PRDPOM→( PRD in post merger); PUD→ public sector deposit, TDL→total deposit liability     
Source: SPSS(20) Output, 2017 

 

8. DISCUSSION OF RESULTS 

In all the regression results, dummy merger (DM) exhibited positive but insignificant impact on the 

confidence of the three categories of depositors at 5% significance level. However, M&As as proxied by shareholders 

funds (a joint proxy for M&As) indicated strong significant and positive impact on confidence of both private 

sector depositors and total depositors. The paired t-test results (Table 10) confirm this across board.   The strong 

and significant impact indicated by shareholders funds  as  an alternate proxy for M&A meets a prior expectation in 

view of the initial jump in the capital base of the commercial banks from about N2billon to  minimum of N25billion 

(over 1000% hike).   The initial insignificant positive impact of M&As on confidence of public sector depositors may 

be linked to occasional withdrawal of government deposits from central bank of Nigeria before 2014 and the 

campaign/election spending in 2014 for the 2015 general elections.  Another possible reason for the insignificant 

outcome is the negative effect of the Treasury Single Account which came into effect in September 2015. When 

these negative factors were adjusted for in PUD2 (Table 9), the impact becomes significant with p-value of 0.002.  



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© 2018 Conscientia Beam. All Rights Reserved. 

In the adjustment, PUD figures for 2014 and 2015 were taken to be slightly higher than the figure for 2013 

assuming there were no such negative intervening factors.   

The insignificant outcomes associated with dummy mergers (DM) may require further research efforts for 

better insight into the actual reasons behind them. Meanwhile, the initial hiccups that greeted the introduction of 

the cashless policy of central Bank of Nigeria-CBN could be part of the reasons. The initial challenges which trailed 

the cashless policy could discourage some depositors particularly the rural depositors from patronizing the deposit 

money banks. Another possible reason may be traced to the nature of business of majority of the traders who 

ordinarily prefer to keep their cash in their vault so that they could easily take advantage of quick business 

opportunities.    

The Adjusted     for the three categories of deposit which stands at 90.5%-PRD, 50.6%- PUD, 65.5%-PUD2 

and 87.0%-TDL, suggests that the mergers and acquisitions mainly account for the improved level of confidence of 

the depositors in the Nigerian banking sector. The overall model appears to have fitted the data well as it is 

very significant with F-statistic p-value for PRD, PUD and TDL of 0.000 respectively.  

 

9. CONCLUSION AND RECOMMENDATIONS 

9.1. Conclusion 

This study examined the impact of mergers and acquisitions (M&As) on depositors’ confidence in the Nigerian 

banking industry for the period 1995-2015. Multiple regression approach (with ordinary least square for estimating 

the parameters) and paired student t-test method were employed in analyzing the data under pre and post mergers 

and acquisitions periods. Findings show that while M&As as measured by dummy merger (DM) indicated mostly 

positive insignificant impact on depositors’ confidence, they exhibited positive significant impact  on the depositors’ 

confidence when proxied by shareholders’ funds - an alternate proxy.  The paired student t-test yielded significant 

positive impact on depositors’ confidence. Based on these outcomes, this study concludes that mergers and 

acquisitions have positive significant impact on depositors’ confidence in the Nigerian banking sector.  

 

9.2. Recommendations  

(i) Banks should be run profitably to ensure enhanced shareholders’ funds through earnings retention.  (ii) 

Other strategies for improving capital base of banks such as right issues, initial public offers, business-induced 

mergers and acquisitions should be exploited whenever necessary.(iii) The banks should partner actively with 

monetary authorities in pursuit of aggressive financial inclusion for cheap deposits and financial stability via 

innovative product offerings.  This will enhance financial stability and the depositors’ confidence in the banking 

industry. (iv) Sudden changes of policies on banking and hasty implementations of new ones should be minimized 

by the regulatory and supervisory authorities as these acts could lead to another crisis of confidence in the banking 

industry in Nigeria. (v) The Cashless policy of the Central Bank of Nigeria should be subject to occasional review 

and fine tuning for maximum benefits.  

 

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