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

Construction project involves huge capital flow (materials, machines,manpower, management, finance) from inception to completion and handover. Bankconsolidation will enhance synergy; improve efficiency through cost reduction revenue inthe long- run, reduction in the industry‟s risk by eliminating weak bank and acquiring ofsmaller ones by the bigger and stronger bankers as well as creating opportunities forgreater diversification and financial intermediation. This paper aimed at assessing postconsolidation effect of the banking sector recapitalization on construction industry andthe major objectives of the study are: assessing the volume of credit facilities given tobuilding contractors by commercial banks the trend in the interest rates charged bycommercial banks on credit facilities allocated to building and civil engineeringcontractors and to evaluate whether building and civil engineering contractors now havebetter access to credit facilities. This research is purposive and 120 structuredquestionnaire were distributed to the construction professionals, developer, financialinstitution houses, and registered building and civil engineering contractors in someselected firm in Lagos State and Ogun state out of which 92 questionnaire were retrievedand analyzed. The result of the hypothesis showed that the level of construction activitiesfinanced by banks has not increased during post-consolidation. The paper found out thefollowing as effects of banking sector recapitalization on construction industry whichresulted into the inability of the contractors to meet up the outrageous demands for highvalue collateral to commemorate loan applied for, limited payback period on the loanapplied for, because the longer the payback period; the higher the interest rate and finallyhigh interest rate charged on the loan obtained by the contractors which are geometricallyincreased from 3-30 percentage. The research work thereby recommendCommercial banks need to pay more attention in financing medium and small size firmand their projects as they constitute larger percentage of the Nigeria constructionindustry, so as to increase their financial activities and expand their assets and recoupingcapital.Keywords: Recapitalization, Construction Industry, Consolidation, Banking