Abstract
This study examined the impact of the government-induced banking consolidation on banks' productivity in Nigeria by analyzing changes in total factor productivity (TFP) between 2002 and 2011. The methodology adopted in carrying out the study is Data Envelopment Analysis (DEA) generated Malmquist Productivity Index (MPI). It was found that in spite of the fact that the changes are by fiat, TFP shows growth trends on the market average, market categories and individual bank levels. The result also indicated that both constant return to scale (CRS) and variable return to scale (VRS) technologies returned the same growth averages of 8%. This is an important indication that uniformly the market is operating with similar technology in information technology (IT) and computerization. It is therefore recommended that the deposit money banks (DMBs) and Central Bank of Nigeria (CBN) should enhance mass migration to the modern banking system largely through the reduced costs of financial intermediation to sustain the growth trends. The regulatory authority should also be concerned with desirable banking culture shifts not only to keep efficiency and productivity on upward trending, but in order to succeed in various monetary policies path-through. To this end, it is also recommended that currency outside the banking sector should be depleted to enhance banking culture towards zero productivity slacks with banks hovering around their most productive scale size (MPSS) threshold.
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