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CONSOLIDATION AND ASSET QUALITY OF BANKS IN NIGERIA
ABSTRACT: The banking sector in Nigeria over the years has witnessed a number of crises that led to the distress of many banks particularly in the 1990s through early 2000s. The crisis, which was caused and fueled by among others by high figures of non-performing loans and loan loss provisioning leading to dissipation of profit, capital erosion and impairment of liquidity, and consequently poor asset quality has necessitated the introduction of consolidation in order to address the problem head-on. This study assesses consolidation and asset quality of banks in Nigeria. The study designs its methodology along historical and descriptive approaches, and uses t-test to test the research hypotheses based on the secondary data collected from 10 sampled banks over the period 2002 through 2008. The study finds that consolidation has positive impact on non-performing loan. Based on the findings, the study recommends that the regulatory authorities be allowed to exercise its regulatory functions unperturbed; such as evolving tighter limits on excessive concentration of risk and tightening provisioning requirements on non performing loans so that banks liquidity is sustained especially during economic downturns.
Keywords: Consolidation, Asset Quality, and Nonperforming Loans