Banking reforms are aimed at ensuring effective operations in the banking sector. This is done with the aim to instill public trust and confidence in their bank. In addition, this encourage the vibrant banking operations in ways that would bring about less bank failures and make the banking industry a major player in the country’s economy.Government is a major agent of change that creates the right atmosphere for the introduced reforms to thrive.
Mostly, agencies of government as the central banks are institution utilize to implement the required changes in the banking industry.In the reforming of the Nigerian banking industry the Nigerian government through its Central Bank has played prominent role in ensuring that the process was easily conducted with speed in allowing the merger successful. The reforms measure introduced into the Nigerian financial sector has greatly aided in the consolidation and growth of the banks.The recapitalization of the country’s banking industry is made feasible by the adopted measure in Mergers and acquisitions. If no considerations for mergers and acquisitions were put in place by the government, there would have being just few banks that would have met the 25 billion naira target. As (Ogunleye (2005) has rightly observed, “The ability of the existing banks to meet up with the recapitalization reform policy is adduced to the successful merger and acquisition most of them entered into”.
Hence, the reform measure that is aimed at brining about effective operation and massive capital support to national projects and to the private sector development would not have materialized. This has brought back confidence and trust in the Nigerian banking sector, with international interest and recognition. The ability of the existing banks to meet up with the recapitalization reform policy is adduced to the successful merger and acquisition most of them entered into.Thus, the role of government in reforming active sector in the economy, such as the banking sector is one that is germane to making the process to succeed. (Soludo 2004) The level of determination and the spirited will shown by government agency in the reform process implementation goes a long way to make merger and acquisition a viable tool for effective operations and a means of bringing consolidated operations as its applies to the banking industry.
It is arguable, given the successful outcome of the Nigerian recapitalization reform policy in its banking sector, that it has attained high success rate. Many international and national investors now have great confidence in the Nigerian banking industry.Furthermore, the banks are now consolidated with huge financial backup to give out loans for developmental projects, and also expand their banking facilities to other neighboring African nations and western countries.This consolidation in the industry is sped up as many of the banks took to the advantages associated with mergers and acquisition (Njoku, 2006).
The records of Nigerian quoted shares is everyday appreciating, this is a further testimony to the growth in the industry, as shareholders are made better off with the increased in the share price.Reform measures introduced into banking industry are aimed to effect changes that would bring about effectiveness and development in areas of operations in the banking industry. For government to effective attain those desired changes in the banking industry through its reform measures it need to set up conducive atmosphere to assist banks to transform their operation mode in tuned with the development trend introduced by the reform.Some of this conducive framework has to do with the right legal framework that will encourage the progress and speed in the execution of merger and acquisition, available communication channels between government agency (such as CBN, in the case of banking merger) and parties to the merger and acquisition deal (Council advisory Group, 2004).
Furthermore, encouragement and support to financial institutions that would directly be affected by government reforms policies should be carried out by government. This will not only motivate them to comply, but they will see reason why this is in their own advantage to ensure development.The condition for operating business such as financial institution is culminated with high risk especially for developing countries such as Nigeria. To war an effective war against risk of unsuccessful operation jointly pulling of resources through merger is recommended.
However, for this to be successful the right partners should be selected and selection should be based on the compatibility of corporate cultures and similarity in mission statement and corporate objectives.This is in line with the view of Shannon and Stephen (2000:143), where it is advocated that a clear objective and integration of partners’ targets and goals should be a germane issue when selecting partners for mergers and acquisition deals.Within the internal financial institutions, proper consideration on the effect of merger on the human resource and managerial effectiveness should be carried out thoroughly at the negotiation and implementation stage of the merger.Consideration on job security, differences in cultural and business strategy of the merging companies, restructuring of organizational positions, consideration of who will be competent enough to man the available positions, workers feelings towards the merger, and how to resolve this. All the above should be adequately catered for as the merger process unfolds. In this same view, Sunoo (1995:30), argues that “human problems are potentially important in themselves determine its success or failure”.
