The Impact of Bank Consolidation on Economic Growth in Nigeria

The banking industry is a highly regulated industry in any economy often regarded as the engine of economic growth and development, based on its financial intermediation functions. This paper therefore examines the impact of bank consolidation reform on the economic growth in Nigeria using Regression analysis to examine the impact of both pre and post consolidation financial performances on economic growth. Commercial Banks Total Assets, Interest Rates of Money Markets and Total Credit to Private Sectors were used as proxies for financial performances of the banks while Real Gross Domestic Product was used as proxy for economic growth for a period of 16 years, 8 years of pre-consolidation era (1998-2005) and 8 years of post-consolidation (2006- 2013). The study observed that post consolidation has a significant impact on economic growth in Nigeria while pre consolidation has no significant impact on economic growth in Nigeria. The study therefore concludes that Nigerian economy has immensely benefited from the consolidation reforms and therefore recommends that there should be adequate implementation of policy frameworks and initiatives in the areas of quality bank management, supervision and control by the Central Bank of Nigeria and the Federal Government to ensure consistency in policy objectives and instruments to boost economic growth. Bank consolidation exercise should also be reviewed frequently and efficiently to sustain the stability and performance of the banking industry and the economy.