Finance & Investment

The Nightmare of Ailing Banks of Nigeria

By Toluwani Oyedemi


It is no news that the year 2018 has been an eventful one for the Banking Industry in Nigeria. In the past four months, major changes have been made in the Industry at an alarming rate. The first was the takeover of Skye Bank Nigeria Limited by Polaris Bank Nigeria Limited. The second is the recent news of a prospective merger between Access Bank Nig. Ltd and Diamond Bank Nig. Ltd. The rate at which takeovers are being staged and mergers been proposed shows that there is trouble in paradise where the Nigerian Banking Industry is concerned. These events then birth the questions as to: Which bank is next? What other event will 2019 bring?

 “A bank is said to be “failing” or has “failed” when it is unable to meet its customers’ obligations in the ordinary course of its business”[1] When a bank is unable to satisfy the obligations it has to its customers as at when due, it is also said to have failed. When a bank fails and such failure cannot be reversed, the CBN or any other person shall for the purpose of restructure, purchase or acquire the said bank.

Contributory factors to Bank failures in Nigeria include: Capital Inadequacy or Liquidity, which was the reason for the Diamond and Access Bank merger; Management Ineptitude and Poor Corporate Governance as was the case in Skye/ Polaris Bank takeover, amongst others.

Mergers, Acquisitions and Takeovers of Banks are measures of staging an intervention to prevent the winding up of such Banks. Therefore, early signs and projections that a bank is failing should not be overlooked by the Banks, their customers and the CBN to ensure that adequate steps and measures are taken on time to prevent these occurrences.

[1] Dr J.E.O Abugu, “The Law of Banking” Commercial Law in Nigeria ed. E.O AKANKI, (University of Lagos Press, 2nd ed 2007) 554

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