Topic: THE IMPACT OF BANK CONSOLIDATION ON THE MANUFACTURING SECTORS IN NIGERIA12

Chapter One

INTRODUCTION

1.1 Background of the Study

1.2 Statement of Problem

According to (Tomola, 2012) who noted that, there has been a growing concern on the decline of the output of the manufacturing sector in Nigeria in recent times, despite the fact that the government embarked on several strategies aimed at improving industrial production and capacity utilization of the sector. This worry is understandable in view of the fact that it has been generally acclaimed through the Kaldor’s first law, that manufacturing sector is regarded as the engine of growth of the economy. In addition to (Libanio, 2006) posited that the unimpressive performance of the sector in Nigeria is mainly due to massive importation of finished goods and inadequate financial support for the manufacturing sector which ultimately has contributed to the reduction in capacity utilization of manufacturing in the country. Enebong, (2003) argued that the level of the Nigerian manufacturing organizations performance will continue to see a decline because as it is now, the manufacturers will have even more problems in assessing raw materials due to competition from the foreign firms. Accordingly, the manufacturing firm’s Nigeria is faced with the problem of accessibility to funds. Even the financial sector reform of the structural Adjustment Programme (SAP) which was meant to correct the structural imbalance in the economy and liberalize the financial the financial systems but did not achieve the expected results. Edirisuriya,( 2008) in favour to the banking consolidation noted that financial sector reforms are expected to promote a more efficient allocation resource of resources and ensure financial intermediation occurs as efficiently as possible. This also implies that financial sector liberalization brings competition in the financial markets, raises interest rate to encourage savings, thereby making funds available for investment and hence lead to economic growth stated by (Asamoah, 2008). Therefore it is logical to assume that financial liberalization enhances funds mobilization and economic growths are required for firm’s performance and economic growth. This study is specifically interested in answering the following questions: Has bank lending to the manufacturing sector improved significantly since the introduction of the financial sector reforms? Is there a significant relationship between bank lending and the output of the manufacturing sector in Nigeria?

1.3 Aim and Objectives of the Study

The major objectives or this study is to examine the impact of Bank consolidation on the performance on manufacturing sectors in Nigeria. To achieve this objective below are some of the specific objective of the research work To examine whether the manufacturing firm in Nigeria have better access to funds due to the consolidation of Banks To examine if interest rate in pre-bank consolidation era is lower than in post-consolidation period. To examine if bank consolidation has impacted positively on the manufacturing firms profitability and growth rate To examine if bank consolidation has a significant effect on shareholding and GDP on the manufacturing sector

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