The on-going banking reforms by the Central Bank of Nigeria (CBN) took a new dimension recently with the merger of Access Bank plc with Intercontinental Bank plc. The new business deal with Intercontinental, which was among the nine lenders rescued in the $4billion CBN’s bailout 18 months ago, makes the financial institution second of the rescued lenders to announce an agreement with new investors, just after Union Bank expressed readiness for a $750million deal with a consortium led by African Capital Alliance, a private equity firm.

Accordingly, financial analysts stressed that the memorandum of understanding (MoU) signed by both banks to formalise the agreement and the transparent selection as well as approval of the board of directors from both organisations were in accordance with international best practices. The selection process, which they said must be subject to regulatory approval, would further enhance efficiency in the system to ensure the emergence of a strong and competitive financial institution in Nigeria and African sub-region.

Thus, going by the position of CBN as the monetary authority providing appropriate regulatory framework for commercial banks to operate and the terms of the MoU, both banks still require an approval from the managements of the apex bank as well as Securities and Exchange Commission (SEC) to further strengthen the merger.

When contacted, the director of membership, International Logistics and Administration, a financial analyst, Mrs. Adeola Emeka, explained that the taking over of Intercontinental by Access Bank as well as the new business deal in Union Bank was a step in the right direction to create confidence in the banking public. “Both banks have the technical-know-how and potentials to function optimally in order to enhance capacity utilisation in the industry.

We must realise that a strong financial institution helps to oil the wheel of business activities by revenue generation which is the essential ingredient of business available. Therefore, we urge CBN to facilitate the process and allow other weak banks to merge. No commercial bank should be allowed to liquidate. Instead, transparent processes of merger and acquisition should be encouraged to create confidence in the banking industry and safety of depositors’ fund”, she stated.

She added, “a bank is a financial institution that renders financial services, accepts deposits and gives out loans and also a custodian of valuable items. Therefore, when a particular bank can no longer meet up with these responsibilities, it becomes necessary for such a financial institution to merge, or be acquired by another bank operating with a larger capital base in order to remain in business. In that capacity, the CBN needs to take necessary steps to ensure that the processes are completed to create confidence in the banking system.”

“Merger is the process where by two banks come together to become one big organisation and when properly carried out the exercise could revolutionalise the banking industry in the country. There are benefits like efficiency in banking operations as well as human capital development, growth in terms of expansion of the bank, growth in technology need, effective capacity utilisation and the tendency to create more jobs because new branches would be opened and operations decentralised to meet up with international standards. Also, the individual depositors stand to benefit as deposits are guaranteed. Through a successful merger process more revenue would be mobilised to finance investments which would encourage more entrepreneurs to invest”.

However, for most shareholders, the merger of Access Bank with competence in wholesale and commercial banking techniques and Intercontinental known for its strategy in retail banking operations would create a high level of efficiency in the banking.