Bank Consolidation and Small Business Financing in Nigeria
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Prior to the 2004 reform in the Nigerian bank~ sector, banks neglected the small and medium class saver and
concentrated more on big corporate savers. Many banks abandoned their essential intermediation role of mobilizing
savings and inculcating banking habit at the household and micro enterprise levels. This paper presents empirical
findings on the effects of the 2005 bank consolidation on small business finance in Nigeria. The main objective of
this paper is to assess the response of flow of credit from the banking sector to small and medium enterprises in
Nigeria. Data for the study were sourced from the list of the 25 post consolidation banks in Nigeria. Panel data
covering a period from 2004 to 20ll were analysed using the Levin, Lin and Chu panel unit root test analysis to
ascertain the authenticity and accuracy of the data series as well as its reliability on policy issues. The study adopts
panel regression approach comprising of fixed and random effect models and used Hausman Taylor option in
selection of a more efficient estimator for the model equation. The study shows a percentage increase in post
consolidation asset base by over 9 percent for the banks and profit maximization increases by 72 percent which
could translate to increased bank propensity and readiness to lend. There is also a significant increase in SME
credit supply accessible by firms resulting to increase investment and consolidated effort to encourage the
development of more SME driving enterpr ise. The study therefore recommends that cr edit policy effect should
ensure that banks reorganize their asset portfolios so as to create more provision for lending t o small firms rather
than implementing policies that allow for more stringent conditions and r equirements that discourage future
development of SME investments in the economy
Keywords
HF5601 Accounting, HG Finance