Post Consolidation Effects of Banking Sector Recapitalization on Nigeria Construction Industry (Lagos and Ogun State Case Study)

Abstract: Construction project involves huge capital flow (materials, machines, manpower, management, finance) from inception to completion and handover. Bank consolidation will enhance synergy; improve efficiency through cost reduction revenue in the long- run, reduction in the industry‟s risk by eliminating weak bank and acquiring of smaller ones by the bigger and stronger bankers as well as creating opportunities for greater diversification and financial intermediation. This paper aimed at assessing post consolidation effect of the banking sector recapitalization on construction industry and the major objectives of the study are: assessing the volume of credit facilities given to building contractors by commercial banks the trend in the interest rates charged by commercial banks on credit facilities allocated to building and civil engineering contractors and to evaluate whether building and civil engineering contractors now have better access to credit facilities. This research is purposive and 120 structured questionnaire were distributed to the construction professionals, developer, financial institution houses, and registered building and civil engineering contractors in some selected firm in Lagos State and Ogun state out of which 92 questionnaire were retrieved and analyzed. The result of the hypothesis showed that the level of construction activities financed by banks has not increased during post-consolidation. The paper found out the following as effects of banking sector recapitalization on construction industry which resulted into the inability of the contractors to meet up the outrageous demands for high value collateral to commemorate loan applied for, limited payback period on the loan applied for, because the longer the payback period; the higher the interest rate and finally high interest rate charged on the loan obtained by the contractors which are geometrically increased from 3-30 percentage. The research work thereby recommend Commercial banks need to pay more attention in financing medium and small size firm and their projects as they constitute larger percentage of the Nigeria construction industry, so as to increase their financial activities and expand their assets and recoupin