In Nigeria, bank consolidations as a monetary policy gave rise to mergers. Prior to the consolidation policy, banks witnessed several crises that led to the distress of many. Much of the crisis was caused and fueled by high loan loss, provisioning lending to capital erosion, and liquidity impairment, poor asset quality, and dissipation of profit. The distress necessitated monetary policy through the introduction of banking sector reform such as consolidation to address the problem. The idea behind the financial sector's monetary policy is to make the sector more competitive and provide services that impact the welfare of citizens through cost savings and improved efficiency. In this article, the Difference in Differences model is positioned to determine the efficiency effect of mergers in the banking sector of Nigeria from 2000 to 2020. Data from 14 banks were analyzed, with separation between the merged (treated) and non-merged groups (non-treated) to take account of the contrafactual. Difference-in-differences models are used for estimating the effect of exposure by using changes over time in a treatment group relative to a control group. The result indicates efficiency is not significant in the bank merger from the increased capital base of Nigerian banks, within the years considered.

Keywords: Difference in Differences, Efficiency, Merger, Consolidation, Monetary Policy

JEL classification: G21, G34, E4, E5, E6