CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
A review of developments in the Nigerian banking and financed system indicates that the banking sector has undergone remarkable changes over the years, in terms of the number of institutions, ownership structure, as well as the scale of operations driven largely by the consolidation of the financial sector in line with the global trend. As at the end of March 2004, insured banks stood at 89 with various sizes and degrees of soundness. The Central Bank of Nigeria (CBN) rating of all the banks classified 62 banks as sound/satisfactory of the banks did not render any returns during this period. The sector generally enjoyed a stable operating environment until July 6th 2004, when the announcement of the CBN which introduced a major policy initiative effective the sector.
The foregoing not withstanding, the market share based on the industries total asset distribution, shows that the sector was highly concentrated with the top ten banks accounting for more than 50% percent of the total asset. Many of the 89 banks are small in size and unable to effectively compete with the bigger ones. Many of the small banks are closely held and are played by various problem and constraint which includes: Low capital base, weak corporate governance as manifested in meddlesome interference in management function, poor risk management, unethical and unprofessional practice, Mal-adaption of the banking industry as bank were not addressing the core needs of the environment low confidence in the Nigerian banking system, unethical competition leading to some banks covertly de-marketing the competitors, late or non- publication of annual account that obviates the impact of market discipline in ensuring banking soundness, over-dependence on public sector deposits, neglect of some and medium scale enterprises by the system, insolvency as evidence by negative capital adequacy ratio and shareholders funds that had completely eroded by operating loss, over-trading, high incidence of non-performing loans, weak management, inaccurate report and noncompliance with regulatory requirements, gross insider abuse, credits, neglect of small and medium class savers, ethnic misconduct, falsification use, returns by the banks to the central bank, unprofessional use of female staff in some banks in the name of “Marketing”, high lending rate. From the foregoing analysis, the Nigerian banking system faces enormous challenge which if not addressed urgently could snowbell into a crisis in the near future. In view of the identified problem of the Nigerian banks, the Central Bank of Nigeria (CBN) which serves as government agency and the government as the custodian of the masses. Discovered the unethical behavioural disposition of Nigerian banking industries, from time past, the regulatory and supervisory authorities had found it difficult in trying to get bank to always comply with regulatory guidelines. Some banks were even suspected to be investing huge resources in exploiting every available loophole in the regulatory guidelines. That bank which religiously towed the path of honour appeared to be fighting a loosing battle. It seems to be a case of “if you could not beat them, you join them”, there is a need to take an imperative step to eradicate the draconian situation in the banking industry. This, however, led to the decision made by the CBN through it governor, on the 6th of July, 2004, at the special meeting of the bankers committee, the governor, Professor Charles Chukwuna Soludo rolls out new capital base among other things which finalized at N25 billion at minimum capital base with full compliance before the end of December 2005. this led some of the bank to the banks to go into Initial Public Offer (IPO), Private Placement etc. with the minimum capitalization of N25 billion banks are continually flooding the capital market to raise additional capital funds either to meet up with the minimum requirement or to position themselves for Merger and Acquisition which is currently taking place within the banking industry in Nigeria, are here to stay and should change the face of the banking sector beyond recognition. The consolidation deadline on 31St December, 2005 ultimately became a reality.
Before then, doubting ” thomases” were still believing that, it could be extended. They were caught unaware, on the other hand, very serious institution believed from the on set that the level of capitalization required was apparently a Herculean task. It was achievable and hence, they stared working towards the realization of the set target. The deadline did not catch such institution napping. In fact, a few of the 89 bank which were already capitalized up to or even beyond the required benchment of N25 billion did not choose to rest on their oars but out to further strengthen themselves through acquisition (bought over) of smaller banks, injection of flesh via the capital market etc. while others were consummated i.e. Merger, those banks which couldn’t scale through the hurdles went into extinction. They were handed over to the NDIC (Deposit Insurance Corporation).
Furthermore, the issue of consolidation of banks is an integral part of NEEDS i.e. National Economic Empowerment Development and Strategy. Introduced by the last regime. It should be noted that Merger and Acquisition apex regulatory body is (SEC) i.e. Security and Exchange Commission. This authority sees to the conditionality for merger and acquisition of firms/companies in Nigeria.
However, there is a needs to thoroughly study the requirement for mergers and acquisition. The efficacy of this study is to exams the challenges of mergers and acquisition to human resources management in the Nigerian banking industry.
1.2 STATEMENT OF THE PROBLEM
The banking industry in Nigeria went through structural changes which has pose a challenges to employee behaviour. The implementation of the policy have induced a shake-out in the industry, which has infused a new set of challenges to human resources in the banking sector. Some of which include: Delayering, outsourcing, job-cutting, from junior to senior staff, downsizing, rightsizing, precipitate retirement, reduced morale and loss of bargaining power, contravening work schedule, reduction in rank of staff i.e. from the chief executive officer to the managing director.
This has created room for apathy and disparity. Also the emerging bank came across the problem of different orientation and inactive of merging workers to dealt with and remuneration package disparity that need to be integrated into the direction of new banks. It should be noted that the difference that are occurring should not be neglected, that if over look could to crisis in the industry. This will make the essence of merger and acquisition to be a wasted effort.
After merger and acquisition, the major casualties are always the human behavioural work pattern which has a resultant effect on individual and groups at work place. This is because staffs of the effected banks will be jittery about job security, which invariantly affect their productivity. This include:
1. The issues of job losses from top executive to junior staff.