EFFECT OF BANK MERGERS AND ACQUISITION ON SMALL BUSINESS LENDING IN NIGERIA
ABSTRACT
Banks involve focal position in the nation's financial framework and are fundamental specialists in the advancement procedure. By intermediating between the surplus and shortage reserve funds' units inside an economy, banks activate and encourage effective distribution of national funds, in this manner expanding the quantum of ventures and thus national yield. Thus, the study seeks to ascertain the effect of mergers and acquisition on small business lending in Nigeria. Data was sourced from the Nigerian Stock Exchange and the method of Ordinary Least Squares (OLS) was adopted in estimating our specified model. Findings from our estimated model reveal that positive and statistically significant relationship exists between mergers and acquisitions (M&A) and small business lending in Nigeria. We therefore recommend that mergers and acquisitions (M&A) be encouraged as it offers and avail a large pool of funds for lending to small business in Nigeria, particularly those in the quest to create employment and significantly reduce poverty.

TABLE OF CONTENTS
CHAPTER ONE    
INTRODUCTION    
1.1     Background to the Study    
1.2     Statement of the Research Problem    
1.3    Objectives of the Study    
1.4    Research Hypotheses    
1.5    Scope of the Study    
1.6    Relevance and Significance of the Study    
1.7    Limitation of the Study    
REFERENCES    
CHAPTER TWO    
LITERATURE REVIEW    
2.1     Introduction    
2.2    Concept of Merger and Acquisition    
2.2.1    Types of Merger    
2.3    Merger and Acquisition in the Banking Industry    
2.4    Review of Mergers and Acquisition in Nigeria    
2.5    Drivers and Motives of Merger and Acquisition    
2.6    Small Business Lending    
2.6.1    Definition of Business advance    
2.6.2    Types of Small Business Loans    
2.7    Small Business in Nigeria    
2.8    The Four Effects of M&As on Banking Lending to Small Business    
2.8.1    Static Effect    
2.8.2    Restructuring Effect    
2.8.3    Direct Effect    
2.8.4    External Effects    
2.9    Theoretical Literature    
2.10    Theoretical Framework    
2.10.1    Disciplinary mergers hypothesis    
2.10.2    Synergistic mergers hypothesis    
2.10.3    Pecking Order Theory    
2.11    Empirical Literature    
REFERENCES    
CHAPTER THREE    
RESEARCH METHODOLOGY    
3.1    Introduction    
3.2    Research Design    
3.3    Population and Sampling    
3.4    Source of Data    
3.5    Measurement of Variables    
3.6    Model Specification    
3.7    Data Analysis Plan    
CHAPTER FOUR    
EMPIRICAL ANALYSIS    
4.1    Introduction    
CHAPTER FIVE    
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION    
5.1    Introduction    
5.2     Summary of Findings    
5.3     Conclusion    
5.4     Recommendations    
Bibliography    
APPENDIX    
CHAPTER ONE
INTRODUCTION
1.1     Background to the Study
The significant changes in the Nigerian deposit money banks or saving money framework may have come as a shock to a few people. Be that as it may, to the individuals who have been checking the circumstances of the banks, it couldn't have come as a shock. The rate of bothered and in fact bankruptcy of the deposit money banks has been with us for a long while. For quite a while in the historical backdrop of strategy repairs in Nigeria, building up the saving money banks was given immeasurable consideration. Different changes were made in the deposits money banks with the aim of creating different areas, accordingly driving the whole economy. The guideline of raising the base capital for each to twenty five billion Naira was for the most part accomplished through bank combination by the instrumentality of mergers and acquisition (M&A). Suggested in the recapitalization guideline is the conviction that more grounded banks will go about as a springboard for the development and advancement of alternate areas of the economy particularly cabin commercial ventures and other Small and Medium Scale Enterprise (SMES).
As indicated by Berger and Udell (1996) the significance of little organizations in the advancement of economy improvement can't be over accentuated. Little organizations assume noteworthy part during the time spent in industrialization and financial development. Beside expanding per capita wage and yield, little organizations make occupation opportunities, upgrade regional economic equalizations through modern transfer and for the most part advance compelling asset use that is basic to the building of economic improvement and growth. The phenomenal liquidation of twenty-six Nigerian banks in 1998, notwithstanding the prior closure of five banks in 1994/95, did not put a conclusion to the trouble Syndrome (Iganiga, 2000 and Imah, 2005). Without a doubt, it could be conceded that to have rinsed the saving money arrangement of upset and ruined foundations in 1998, more establishments should have shut, yet that was not the situation because of some undeniable reasons. Unique current changes incorporate the expansion in the base paid up capital of banks from N500 million preceding 2001 to N1 billion in 2001 and N2 billion in 2002.
Mergers and acquisitions that took place in the Nigerian Banking Industry in 2005 were to establish wealth for shareholders, furnish solid and reliable deposit money institutions that can compete favorably with other financial institutions elsewhere. Mergers and acquisitions are not new, for case, somewhere around 1993 and 1996 around 1500 mergers were recorded in the USA (Pilloff 1996), a comparable experience was seen in the Europe and Asian landmasses (Schenk 2000). Going by market value of the merged and acquired banks, the wealth of shareholders had been reduced, in some other cases totally destroyed. This integration wave has contributed immensely hike in the average size of deposit money institutions. There are parcel of advantages from the lifting of geographic obstructions to rivalry in managing an account and the related influx of mergers and securing movement. These incorporate expanded geographic expansion, enhanced rivalry, and the destruction of settled in lack or self-serving bank supervisors. What is less clear is the impact of mergers and procurement on credit supply to U.S. organizations, particularly little organizations that is a capacity on banks for outside credit, (Onikoyi and Awolusi 2014).
Banks involve focal position in the nation's financial framework and are fundamental specialists in the advancement procedure. By intermediating between the surplus and shortage reserve funds' units inside an economy, banks activate and encourage effective distribution of national funds, in this manner expanding the quantum of ventures and thus national yield (Afolabi, 2004). Through monetary intermediation, banks encourage capital arrangement (venture) and advance financial development. A merger is an amalgamation of two or more separate organizations into a solitary business, while acquisition is the procuring of controlling interest in one company by another company, Ijoart (2012). The decision to go into a merger or acquisition depends primarily on the decision of the parties involve, their financial strength and the size of the existing enterprise. Customarily, as indicated by the researchers, little business loaning as a keeping money item has inalienably been nearby in nature, which implies the item would likely be supplied to firms and borrowers having particular credit needs and dangers implanted to the possibilities of the neighborhood economy. Cole, John and Louise, (1996) propose that earlier research has built up a genuinely solid connection between keeping money organization size and the supply of little business credit, with substantial establishments dedicating lesser extents of their resources for little business loaning than little foundations (Berger and Gregory, 1995).
1.2     Statement of the Research Problem
Poor knowledge of the extent and the directions of the impacts of interactions between bank consolidation and bank deposits on small business lending have led to significant counter-productive policies capable of pulling down the entire economy in the near future in Nigeria.Okafor (2015) adopts a concise tool in the form of Monti-Klein econometric event model that serves as a guide in analyzing the dynamic effects of bank consolidation and deposit change interaction on small business lending in Nigeria and found that a positive relationship exist. Chukwu (2015) analyses the effect of Merger and Acquisition on lending to small business using an error correction model and asserted that a negative relationship exist. This study shall analyzethe effect of mergers and acquisition to small business lending using ordinary least square technique and recognizing variables such as capital base, merged banks’ revenue and merged banks’ market share that affect small business lending.Consequently, this study on mergers and obtaining; a feasible alternative for expanded benefit of Nigerian banks and accessibility of assets for loaning too little and medium scale venture was embraced to analyze the quality and spot of mergers and acquisitions in giving financing to loaning to little business. All the more particularly, the study gave answers to the accompanying exploration questions;
What is the impact of an expansion in capital base on an expansion in little business loaning?
Is there a relationship between an expansion in combined banks' income on an increment in little business loaning?
Is there a relationship between expansion in combined banks' piece of the overall industry on an increment in little business loaning?
1.3    Objectives of the Study
To decide the impact of an expansion in capital base on little business loaning.
To investigate the relationship between an expansion in combined banks' income on an expansion in little business loaning.
To decide the relationship between expansion in consolidated banks' piece of the overall industry on an expansion in little business loaning.
1.4    Research Hypotheses
   H1:   There is no effect of an increase in capital base on small business lending.
H2:  There is no relationship between an increases in merged banks’ revenue on an increase in small business lending.                         
H3:    There is no relationship between increases in merged banks’ market share on an increase in small business lending.
1.5    Scope of the Study
    The scope of this study will be to find out the effects of merger and acquisitions on small business lending. It carries out a comparative study of some banks before and after merger, 1997 to 2005 and 2006 to 2014. This research study will focus on five banks listed in the Nigeria stock exchange.
1.6    Relevance and Significance of the Study
The outcome of this research work will undoubtedly be a tool for giving lasting solutions to problems on mergers and acquisition as its importance will be useful to the federal government, banks and the general public at large. This research will educate the general public in making the right choices of banking and investment as only strong, viable and healthy banks will be patronized. It will also be of great significance to the following;
To the government, the study will serve as a guide to assist in policy formulation towards mergers and acquisition on small business lending.
To the academia, this study will contribute immensely to knowledge and literatures to be referred to by researchers as it will add to the body of literatures on the impact of mergers and acquisition to small business lending. It will also throw more light on empirical evidence on the effects of Banks mergers and acquisition on small business lending in Nigeria.
To the Stakeholders, this study will give awareness to management on their responsibility to stakeholders and the manner in which funds are channeled to small scale enterprise.
To the Central Bank of Nigeria and the Securities and Exchange Commission it will help in providing insight to small scale owners on the implications and consequences of poor management of companies’ funds and ensuring that they meet their require reserves in order to prevent the inability of banks to give out loans.
1.7    Limitation of the Study
This study is not immune to some constrainable forces that are capable of downplaying the result of this study, but not sufficient enough to undermine the reliability of the information provided. One of such constraint is inadequate and often unreliable statistics characterizing developing countries like Nigeria with a dual economy. Another constraint is insufficient time and resources. This study anticipates these challenges and will take steps to minimize the effect of such disturbances on the empirical validity of this project.
REFERENCES    
Afolabi, J. A. (2004). Implication of the consolidation of banks for the Nigerian banking system.    Paper Presented at the NDIC Organized Workshop for FICAN Enugu.
Berger, A. N., Saunders, A., Scalise, J.M., & Udell G.F, (1998). The effects of bank mergers and
acquisitions on small business lending, Journal Finance Eonomics 50, 187-229.
Berger, A. N., & Udell G.F, (1995). Relationship Lending and Lines of Credit in    Small Firm    Finance, Journal of Business 68 (July): 351-82.
Berger, A.N., Kashyap, A.K., & J.M. Scalise, (1995). The Transformation of the U.S. banking    industry: What a long, strange trip It's been, Brookings Papers on Economic Activity    (2,) 55-218.
Cole, R. A., John D.W., & Louise R. W, (1996). Bank and Nonbank.  Competition for Small    Business Credit: Evidence from the 1987 and 1993 National Surveys of Small Business    Finances, Federal Reserve Bulletin, 82:11 (November): 983-95.
Chukwu (2015). Influence of Bank Consolidation on small business lending.Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper)
ISSN 2222-2847 (Online) Vol.6, No.12, 2015.
 Okafor (2015). Influence of Bank Consolidations and Bank Deposit Demands on small business    lending.