Determining the Strategic Consolidation of the Capital Base of Nigerian Commercial Banks

Abstract

The reformation of the banking industries by the Central Bank of Nigeria requiring banks’ to consolidate their capital base to N25 billion (about $166.7 million) became an optional concern to various managers in the banking industry. It thus became a necessity on the corporate managers of banks to decide on the different alternatives available to them by considering different criteria in order to strategically consolidate. This paper employed Analytic Hierarchy Process (AHP) as an evaluative tool for strategic reconsolidation of capital base by banks, using the recent experience of six merger/acquisition banks. The aim of the study specifically was to evaluate whether decisions taken by the various groups of banks in meeting the $166.7 million capitalization level could be proved right scientifically. The results confirmed that decisions taken by most of the groups of banks conformed to our scientific result with the exception of only one bank confirming the appropriateness of the AHP approach in such decision-making scenario.

Keywords: strategic consolidation, capital base, Nigeria commercial banks, analytic hierarchy process.