Analysis on the Bank Performance of Nigerian Banks

Analysis on the Bank Performance of Nigerian Banks The provisional title of this research project is: Consolidation and bank performance; analysis of Nigerian Banks 2004 to 2006. The choice of this topic emanates from the fact that the current credit crisis and the transatlantic mortgage financial turmoil have questioned the effectiveness of bank consolidation programme as a remedy for financial stability and monetary policy in correcting the defects in the financial sector for sustainable development. Many banks consolidation had taken place in Europe, America and Asia in the last two decades without any solutions in sight to bank failures and crisis. The paper attempts to examine the performances of government induced banks consolidation and macro-economic performance in Nigeria in pre-consolidation and post-consolidation period. The paper analyses published audited accounts of two (2) out of twenty-five (25) banks that emerged from the consolidation exercise and data from the Central Banks of Nigeria (CBN). We denote year 2004 as the pre-consolidation and 2005 and 2006 as post-consolidation periods for our analysis. In doing this, efforts would be made to examine empirically how bank consolidation through recapitalization has affected the performance of Nigerian banks during the period covered by the research. The data for the work are from secondary sources and would be obtained exclusively from the Central Bank of Nigeria and bank publications, both electronic and paper form. CAMEL analysis will be employed to analyse the financial data so as to ascertain the relationship between consolidation and bank performance. The CAMEL analysis is chosen because of its optimal properties, simple computational procedures and is suitable for an empirical work such as the present research project work. Against the findings that would emerge from the intended empirical investigation of this work, appropriate recommendations that are likely to better enhance the effectiveness of banking sector reforms in Nigeria thereby restoring confidence in the system. CHAPTER 1 1.1 Introduction The Nigerian banking sector over the past 20 to 25 years has experienced boom and bust in a cyclical pattern. After the implementation of the structural adjustment program (SAP) in 1986 and the deregulation of the financial sector, new banks proliferated, mainly driven by attractive arbitrage opportunities in the foreign exchange market (Heiko 2007). Prior to the deregulated period, financial intermediation never took off and even declined in 1980s and 1990s (Capirio and Kligbiel 2003). The sector was highly oligopolistic with remarkable features of market concentration and leadership. Lemo (2005) noted that there are ten Nigerian banks that control more than 50% of the aggregate assets of the banking sector; more than 51% of the aggregate deposit liabilities and more than 45% of the aggregate credits. The sector was characterized by small sized banks with high overheads; low capital base averaging less than $10million; heavy reliance on government patronage and loss making. Nigerias banking sector was still characterized by a high degree of fragmentation and low levels of financial intermediation up until 2004. In the light of the foregoing, banks are compelled by the Central Bank of Nigeria to raise their capital base from N2 billion to 25 billion on or before 31st December, 2005. Most banks resorted to mergers and acquisition as a survival strategy, which saw a reduction in the number of banks from 89 to 25. This study contributes to the concept of bank recapitalization by critically examining the impact of bank consolidation on the performance of banks using a sample of randomly selected Nigerian banks. It is the intention of the researcher to give more validity to empirical evidence that have been obtained by previous researchers on the subject matter. Relevance of the study The earliest set of studies evaluates the effects of bank consolidation through mergers and acquisitions comparing pre- and post- merger performance by measuring performance using either accounting or productive efficiency indicators.The results from both indicators have varied and at sometimes been contradictory. This can be explained by performance-influencing variables like size, brand name, diversification and cost reduction, there is still no reconciliation between these indicators. I intend to contribute to the determinants of bank performance by evaluating the possible performance impact of bank consolidation on banks. Consolidation is the key to improving the performance of banks with low capital base, without which they are bound to fail. 1.3 Background of study Aside being the highest contributor to the market capitalization of the Nigerian stock exchange and smooth and stable income provision to money and capital market, banking industry is capable of attracting potential investor which is a source of every economic development. Financial institutions generally, and banking sector in particular play a crucial role in the development process of mobilizing fund from the surplus sector of the economy to the deficit sectors of the economy. Banks help in increasing the quantum of national savings and investment. Consequently, the volume of goods and services produced in the economy increases overtime through the multiplier effect. Banks enhance stable and smooth income to attract potential investors in line with Modigliani and Miller (1958) theory that investors generally have preference for smooth and stable income. According to sloan and Arlond (1970) consolidation is a fusion of the assets and liabilities, in whole or in part of two or more business establishment. Consolidation represents the idea of investment and the coming together of firms; it can also mean larger sizes, larger shareholder bases and larger number of depositors. According to Adamu (2005) bank or corporate consolidation could be achieved by way of mergers/acquisition and recapitalization. It is more than mere shrinking of number of banks in any banking industry. According to Hall (1999) consolidation is a global phenomenon, which started in the advanced economies of the world. For example, the enactment of Riegle-Neal Act, which allows interstate branch banking beginning from 1997 this led to increase in bank mergers in the USA (Akhavin et al and kwan 2004). Consolidation allow a mega bank to enjoy higher profit, increase revenue and low problem loans. Japanese banking industry also experienced consolidation in the 1990s which resulted to economies of scale (Fukuyama, 1993; Mckillop et al 1996). When banks go bust, their capital base is called to question. Cases of bank failures have motivated researchers to investigate the activities of banks in relation to performance in terms of returns. A view is that consolidation has increased the capital base and size of Nigerian banks but does not necessarily bring about higher performance. Criteria Selecting Nigeria Study Consolidation is a term used by the central bank of Nigeria (CBN) to describe the coming together of some banks within the country to become one bank and be able to meet CBNs requirement for capitalization to a minimum of N25billion. When this happens, it is expected to improve services rendered by the banks. In July 6, 2004, a day now referred to as black Tuesday in banking sector of the economy, the CBN Governor, professor Charles Soludo made an obviously unexpected policy pronouncement. The highlight was the increment of the earlier N2billion to N25 billion, with full compliance deadline fixed for the end of the year 2005. In a bid for banks to meet up with the new requirement, some Banks are exploring the option of inviting foreign investors to buy into Banks. Others are looking at the possibility of getting investors to shore up their capital, and some are looking at the capital market option, while others are considering mergers and acquisition. If the process of consolidation is properly implemented the ongoing consolidation of banks in the country will surely improve the banking sector in Nigeria and translate to better banking services and cheap funds.   More importantly, the public will not have fear of distress in any bank, since the consolidated bank will have enough funds. The need to understand the impact of bank consolidation on Nigerian banks either negative or positive necessitated the use of Nigerian banks as sample for this study. 1.5 Aim To analyze the effect of consolidation on the performance of Nigerian Banks 1.6 Objectives To examine the consolidation process of Nigerian banks. To Asses the performance of Nigerian banks before and after consolidation. To evaluate the impact of consolidation on Nigerian banks. CHAPTER 2: Literature Review 2.1 Introduction This chapter attempts to gain an in-depth view into what is already known in connection with the research topic being studied. It therefore brings to light the different theoretical and methodological approach to the research area, helps develop a practical analytical framework, considers inclusion of variables that may not have been thought about from the inception of the research work and in the long run learning can be gained from mistakes of previous researchers and avoidance of such mistakes would be achieved (Bryman Bell, 2003). The scope of the research is narrowed down through successful study of literature review that was continuous all through the research process. Further, the review of literature will incorporate a wide range of materials sourced from journal articles, corporate websites, government websites, multilateral organisations, text books and online databases which include: Wiley, Science Direct, Emerald and Business Source Premier. Reforms are predicated upon the need for reorientation and repositioning of an existing status quo in order to attain an effective and efficient state. There could be fundamental bottle-neck that may inhibit the functioning of the institutions for growth and the achievement of core objectives in the drive towards enhancing and sustaining the economic and social imperatives of human endeavor. Carried out through either government institutions or private enterprises, reform becomes inevitable in the light of the global dynamic exigencies and emerging landscape. Consequently, the banking sector, as an important sector in the financial landscape, needs to be reformed in order to enhance its competitiveness and capacity to play a fundamental role of financing investment. Many literature indicates that banking sector reforms are propelled by the need to deepen the financial sector and reposition for growth, to become integrated into the global financial architecture; and involve a banking sector that is consulting with regional integration requirements and international best practices. The nexus between consolidation and financial sector stability and growth is explained by two polar views. Proponents of consolidation opined that increase size could potentially increase bank returns, through revenue and cost efficiency gains. It may also, reduce industry risks through the eliminations of weak banks and create better diversification opportunities. On the other hand, it is argued that consolidation could increase banks propensity towards risk taking through increases in leverage and off-balance sheet operations. Advocates Furlong (1994) stated that an early view of consolidation in banking was that it makes banking more cost efficient because larger banks can eliminate excess capacity in areas like data processing, marketing, or overlapping branch networks. Cost efficiency also could increase if more efficient banks acquired less efficient ones. Though studies on efficiency in banking raised doubts about the extent of overcapacity, they did point to considerable potential for improvement in cost efficiency through mergers. Banking reforms involves several elements that are unique to each country based on historical economic and institutional imperatives, for example, in Hungary. Evidence show that the reform in the banking sector was due to high under-capitalization of state owned banks, weakness in the regulation and supervision and deficiencies in corporate governance behavior of banks. Craig and Hardee (2004) conducted investigation on bank consolidation and concluded that as the banking consolidation continues, relationship lending is becoming increasingly rare. As credit scoring and formal, formulaic methods are used more and more, specifically by the large banks, many small businesses may find out that they do not fit the model, especially those enterprises with negative equity. Thus, small businesses may be filling the financing void that is being created by the bank consolidation with non-bank sources of funds. Hughes and Mester (1997) provide evidence to suggest that there are scale economics in banking, bank managers are risk averse, and banks use the level of their financial capital to signal the level of risk. This is an area of interest in Nigerian banking, especially when the return on equity is calculated in another two to three years and then compared with the historical industry average. Rhoades(1996) reported that American banks consolidated in response to the removal of restriction on bank branching across states, while Hughes, J.P; W. Lang; L.J. Mester; C.G. Moon(1998) concluded that the economic benefits of consolidation are strongest for those banks that engaged in interested expansion, and in particular the expansion that diversifies macroeconomic risk. From the literature, it has been observed that well-spaced and implemented financial reforms have the ability to boost financial development indicators. Detractors Hughes J.P; Mester, L.J; and Moon, C.G (2000) also provide evidence that scale economies exist in banking but they fail to account for risk. Thus, scale economies that result from consolidation and diversification do not produce better performance in banking, unless choice makes the banks management more conscious risk and moderates its decisions and actions appropriate larger scale of operation that leads to diversification only reduce liquidity and credit risk under the ceteris bus assumption, and they argued that this is not always the case. The examination of merger and acquisition in European banking and found that industry consolidation was beneficial (by providing social benefits) in the first economic integration stages, but could damage welfare in the more advanced stages as the few big banks safeguard price agreements to forestall foreign competition. The other side to European mergers and acquisitions was because of the possibility of failure. This, of course, ignores the fact that no bank can ever be too big to fail. All it takes for a bank to fail is for bad news? about a bank to get to its stakeholders (especially depositors) and they all walk in at the same time to take their funds! For such bank to survive, it must have sufficient liquid assets to meet all maturing and long-dated obligations (Igangiya, 2006). 2.2 Role of banks In the Economy Banks have an important role to play in an economy, as they are intermediaries between people with shortages and surpluses of capital. The products they offer will include savings, lending, investment, mediation and advice, payments, ownership, guarantee and, trust of real estate. (Bouma et al, 2001). This aspect is critical to this research study as the role of banks in any economy cannot be undermined therefore, the need to explore the effectiveness of their actions and how this ultimately affects the economy. The macroeconomic environment within which firms exist and, operate has an impact upon their activities and governments and other agencies operating at different spatial levels and it can shape behavior and their environment. (Worthington et al, 2001). According to Bouma et al, (2001), as a financial intermediary between market players, a bank has four important functions: First it transforms money by scale. The money surpluses of one person are mostly not the same as the shortages of another person. Banks transform money by duration. Creditors may have short-term surpluses of money, while debtors mostly have a long-term need for money. Banks transform money by spatial location (place). Finally, banks act as assessors of risk. As a rule, banks are better equipped to value the risks of various investments than individual investors who have surpluses available. Also, through their larger scale, banks are more able to spread risks. The major objectives of the banking system are to ensure price stability and facilitate rapid economic development; regrettably, these objectives are still yet to be realised in Nigeria as a result of some infrastructural deficiencies such as basic power, energy, and transportation. Also, the lack of a workable contingency planning framework which provides detailed policy actions to limit crises. The reforms of the banking industry will have an influence on the functions, as it ultimately shapes the way they handle their operations. The reform of recapitalisation and consolidation could mean a larger platform for banks to better carry out their tasks. This literature review takes a look at commercial banks in Nigeria when faced with the reformation of the banking industry, core competences needed by the banks to be successful and the effect on the macroeconomic indicators of the country. 2.3 The concept of capital base The recent call for recapitalization in the banking industry has raised much argument among the bank regulators, promoters and depositors as if shoring up of banks capital base is a new phenomenon in Nigeria. Historically, the failure of pioneer 1930s and 1940s brought about the enactment of banking ordinance of 1952. Banking ordinance of 1952 prescribed an operating license and emphasized on minimum equity capital for all banks (Omoh, 2007). Since then, raising of bank capital has become the hallmark response policy of the Nigerian monetary authorities. Capitalization is an important component of reforms in the banking industry, owing to the fact that a bank with a strong capital base has the ability to absorb losses arising from non-performing liabilities (NPL). Attaining capitalization requirement is achieved through consolidation, convergence as well as the capital market. Thus, banking reforms are primarily driven by the need to achieve the objectives of consolidation, competition and convergence. (Deccan Herald,2004), in the financial architecture. 2.4 The Concept of Bank Consolidation Consolidation is viewed as the reduction in the number of banks and other deposit taking institution with a simultaneous increase in the size and concentration of the consolidation entities in the sector (BIS, 2001:2). It is mostly motivated by technology innovation, deregulation of financial services, enhancing intermediation and increased emphasis on shareholder value, privatization and international competition (Berger et al, 1991). The process of consolidation has been argued to enhance bank efficiency through cost reduction and revenue in the long run. It also reduces industrys risk by eliminating weaker banks and acquiring the smaller ones by bigger and stronger banks as well as creates opportunities for greater diversification and financial intermediation. The pattern of banking system consolidation could be viewed in two different perspectives, namely; market-driven and government-led consolidation. The market-driven consolidation which is more pronounced in the developed countries sees consolidation as a way of broadening competitiveness with added comparative advantage in the global context and eliminating excess capacity more efficiently than bankruptcy or other means of exit. On the other hand, government-led consolidation stems from the need to resolve problem of financial distress in order to avoid systematic crises as well as to restrict inefficient banks (Ajayi, 2005). One of the general effects of consolidation is to the reduction in the number of players, moving the industry more toward an oligopolistic market (Adedipe, 2007). 2.5 Prospect of Bank consolidation In Nigeria The initial public offering by banks through the capital market when completed is likely to increase the level of financial deepening as evidenced in the upsurge in the volume and value of trading in stock market. The reform in the banking industry has been able to attract more foreign investment inflow, especially in the area of portfolio investment; this development if sustained will boost the level of economic activity especially toward non oil sector. The consolidation of banks is likely to attract a significant level of foreign banks entrance into Nigeria which will become a feature in the industry over time. This will bring about more confidence by the international community of the banking sector thereby attracting more foreign investment into the country. As the level of financial intermediation increase, interest rate is likely to fall and increase lending to the real sector that will generate employment and booster growth. 2.6 The Process of Bank consolidation In Nigeria Before any bank can be said to consolidate through merger and acquisition in the Nigeria industry, it must first seek and obtain the approval of the following regulatory and supervisory authorities in the industry. They include the Securities and Exchange Commission (SEC), Central Bank of Nigeria (CBN), Nigeria Stock Exchange (NSE) and the Corporate Affairs Commission (CAC) (CBN, 2004). Chapter 3: Research Methodology Introduction This chapter sets out the method employed in conducting the research. The choice of method was made based on the nature of the research problem. The purpose of this research is to discover, if any, the impact of bank consolidation on bank performance. Effort would be made to ensure that the methodology and conceptual framework adopted in the research are as relevant to the findings as the concepts and theories of the study. This is because the validity and reliability of conclusions are largely influenced by the research process itself. 3.2 Research Design This study is a causal or explanatory analysis since it seeks answers to questions related to the causes and determinants of bank performance. The research adopts a deductive approach. It outlines theories of director relationship to firm performance and draws hypothesis from them. These hypotheses are then tested using empirical social data to either confirm or reject the contentions. 3.3 Quantitative Versus Qualitative Data A clear distinction must be emphasized between quantitative and qualitative data. The former is concerned with the compilation of the results of research in a standardised mathematical form with the analysis conducted by means of statistics. (Saunders et al, 2003, p.378). Here variables are measured on a selection of scales and can then be arranged in order of arithmetical rigour. Conversely qualitative research is subjective in its approach of examining and reflecting on perceptions of understanding social and human activities (Hussey and Hussey, 1997). Qualitative research is inductive and researchers rarely know the specifics of data analysis when they begin a project (Neuman, 2006). It is concerned with the assemblage of data in a non-standardised, descriptive form, with the examination conducted through the use of theoretical models. 3.4 Data Type Raw or summarized data which has already been collected and stored for other purposes aside from that of the research in question is referred to as secondary data (Saunders et al, 2007). This research will make use of multiple-source secondary data collected from bank financial reports and CBN statistical publications available on the CBN, Guaranty trust and zenith banks websites, some paper source of data will also be used. The data/study will be restricted between the period of 2004 and 2006. The year 2004 is the pre-consolidation, 2005 consolidation while 2006 is the post-consolidation periods. The choice of data type is based on accessibility, cost saving and authenticity factors. Sample Selection The representative sample of the Nigerian banking sector to be used as a sample of the population under study is Guaranty Trust Bank PLC and Zenith Bank PLC. CAMEL ANALYSIS CAMEL is derived from the five components of a banks condition which include Capital adequacy, Asset quality, Management, Earnings, and Liquidity. Ratings are assigned for each component, and a composite rating is assigned for the overall condition and performance of the bank. These component and composite ratings are assigned on a scale of 1 to 5, with 1 representing the highest rating (strongest performance) and 5 representing the lowest (weakest performance) (Hirtle and Lopez, 1999). The camel analysis will be used to analyse the performance of banks during the pre-consolidation (2004) and the post-consolidation (2006) periods. Limitation The major difficulty that is likely to be encountered during the course of carrying out this research is the dearth of information, which is usually associated with emerging economies (including the Nigerian economy). Deliberate efforts would therefore be made to obtain information necessary to enhance the quality of the present research. 4.0 CONCLUSION In summary, the research tries to establish that bank consolidation helps in shoring up investment capital, enhances shareholder value, and protects creditors and depositors as well as strengthening banks capacities to attract funds at lower costs enhancing their liquidity positions. An efficient banking system tends to be one of the greatest focuses of the Central Bank of Nigeria since its establishment in 1959. Thus, sufficient capital base has largely constituted the Banks reform policy focus over the years. Hence, it may not be out of place to conclude at this material time that the ongoing reform policy is essential for the attainment of overall macroeconomic stability on a sustainable basis. Accordingly, the Central Bank of Nigeria is admonished to intensify its present efforts geared towards restoration of confidence in the banking system. The research work analyses published audited accounts of two (2) out of twenty-five (25) banks that emerged from the consolidation exercise and data from the Central Banks of Nigeria (CBN). We denote year 2004 as the pre-consolidation and 2005 and 2006 as post-consolidation periods for our analysis. In doing this, efforts would be made to examine empirically how bank consolidation through recapitalization has affected the performance of Nigerian banks during the period covered by the research. The data for the work are from secondary sources and would be obtained exclusively from the Central Bank of Nigeria and bank publications, both electronic and paper form. CAMEL analysis will be employed to analyse the financial data so as to ascertain the relationship between consolidation and bank performance BIBLIOGRAPHY Bernerd, B.P., (2006), The effect of recent changes in the financial sector development in Nigerian, Paper presented at the 15th General Assembly of the African rural and agricultural credit association (AFRACA), Bukina Faso. CBN., (2004), Guidelines and Incentive on Consolidation in consolidating Banking Industry. Charles, C.S. (2004) Consolidating the Nigerian Banking Industry to Meet the Developmental challenges of the 21st century. Paper presented at a meeting of bankers committee Abuja 6 July 2004. Larry, U; et al., (2004) Issues in Financial Institutions Surveillance in Nigeria. A seminar paper by CBN training centre Lagos. Eshodaghor, D.V., (2006), Impact of distressed banks in depressed Economy, Prospects for survival and growth. Bank failure in Nigeria, causes and dimension pp. 17 â€Å" 22. Ezeudusi, F. U., (2002) Marcus, G., (2003), An approach to the consolidation of Banks Merger Issues by regulators., A south African case business paper (4), NDIC Annual Report and Statement of Account . Oviemuno, A.O., (2006) Banking Consolidation in Nigeria and the strategies for Generating better returns. Ogunleye G.A. (2003) The regulatory imperatives of the Universal Banking concept in Nigerian NDIC quarterly, (11) No. (2), pp.20-30 Ochojele, D. I., (2003) The Nigerian banking industry, a review seminar paper. Osaije, E., (1992), Structural adjustment programme in Nigerian economy Victor, Ezeaku., (2003), Consolidation of Nigerian Banking Sector, CBN publication. Analysis on the Bank Performance of Nigerian Banks Analysis on the Bank Performance of Nigerian Banks The provisional title of this research project is: Consolidation and bank performance; analysis of Nigerian Banks 2004 to 2006. The choice of this topic emanates from the fact that the current credit crisis and the transatlantic mortgage financial turmoil have questioned the effectiveness of bank consolidation programme as a remedy for financial stability and monetary policy in correcting the defects in the financial sector for sustainable development. Many banks consolidation had taken place in Europe, America and Asia in the last two decades without any solutions in sight to bank failures and crisis. The paper attempts to examine the performances of government induced banks consolidation and macro-economic performance in Nigeria in pre-consolidation and post-consolidation period. The paper analyses published audited accounts of two (2) out of twenty-five (25) banks that emerged from the consolidation exercise and data from the Central Banks of Nigeria (CBN). We denote year 2004 as the pre-consolidation and 2005 and 2006 as post-consolidation periods for our analysis. In doing this, efforts would be made to examine empirically how bank consolidation through recapitalization has affected the performance of Nigerian banks during the period covered by the research. The data for the work are from secondary sources and would be obtained exclusively from the Central Bank of Nigeria and bank publications, both electronic and paper form. CAMEL analysis will be employed to analyse the financial data so as to ascertain the relationship between consolidation and bank performance. The CAMEL analysis is chosen because of its optimal properties, simple computational procedures and is suitable for an empirical work such as the present research project work. Against the findings that would emerge from the intended empirical investigation of this work, appropriate recommendations that are likely to better enhance the effectiveness of banking sector reforms in Nigeria thereby restoring confidence in the system. CHAPTER 1 1.1 Introduction The Nigerian banking sector over the past 20 to 25 years has experienced boom and bust in a cyclical pattern. After the implementation of the structural adjustment program (SAP) in 1986 and the deregulation of the financial sector, new banks proliferated, mainly driven by attractive arbitrage opportunities in the foreign exchange market (Heiko 2007). Prior to the deregulated period, financial intermediation never took off and even declined in 1980s and 1990s (Capirio and Kligbiel 2003). The sector was highly oligopolistic with remarkable features of market concentration and leadership. Lemo (2005) noted that there are ten Nigerian banks that control more than 50% of the aggregate assets of the banking sector; more than 51% of the aggregate deposit liabilities and more than 45% of the aggregate credits. The sector was characterized by small sized banks with high overheads; low capital base averaging less than $10million; heavy reliance on government patronage and loss making. Nigerias banking sector was still characterized by a high degree of fragmentation and low levels of financial intermediation up until 2004. In the light of the foregoing, banks are compelled by the Central Bank of Nigeria to raise their capital base from N2 billion to 25 billion on or before 31st December, 2005. Most banks resorted to mergers and acquisition as a survival strategy, which saw a reduction in the number of banks from 89 to 25. This study contributes to the concept of bank recapitalization by critically examining the impact of bank consolidation on the performance of banks using a sample of randomly selected Nigerian banks. It is the intention of the researcher to give more validity to empirical evidence that have been obtained by previous researchers on the subject matter. Relevance of the study The earliest set of studies evaluates the effects of bank consolidation through mergers and acquisitions comparing pre- and post- merger performance by measuring performance using either accounting or productive efficiency indicators.The results from both indicators have varied and at sometimes been contradictory. This can be explained by performance-influencing variables like size, brand name, diversification and cost reduction, there is still no reconciliation between these indicators. I intend to contribute to the determinants of bank performance by evaluating the possible performance impact of bank consolidation on banks. Consolidation is the key to improving the performance of banks with low capital base, without which they are bound to fail. 1.3 Background of study Aside being the highest contributor to the market capitalization of the Nigerian stock exchange and smooth and stable income provision to money and capital market, banking industry is capable of attracting potential investor which is a source of every economic development. Financial institutions generally, and banking sector in particular play a crucial role in the development process of mobilizing fund from the surplus sector of the economy to the deficit sectors of the economy. Banks help in increasing the quantum of national savings and investment. Consequently, the volume of goods and services produced in the economy increases overtime through the multiplier effect. Banks enhance stable and smooth income to attract potential investors in line with Modigliani and Miller (1958) theory that investors generally have preference for smooth and stable income. According to sloan and Arlond (1970) consolidation is a fusion of the assets and liabilities, in whole or in part of two or more business establishment. Consolidation represents the idea of investment and the coming together of firms; it can also mean larger sizes, larger shareholder bases and larger number of depositors. According to Adamu (2005) bank or corporate consolidation could be achieved by way of mergers/acquisition and recapitalization. It is more than mere shrinking of number of banks in any banking industry. According to Hall (1999) consolidation is a global phenomenon, which started in the advanced economies of the world. For example, the enactment of Riegle-Neal Act, which allows interstate branch banking beginning from 1997 this led to increase in bank mergers in the USA (Akhavin et al and kwan 2004). Consolidation allow a mega bank to enjoy higher profit, increase revenue and low problem loans. Japanese banking industry also experienced consolidation in the 1990s which resulted to economies of scale (Fukuyama, 1993; Mckillop et al 1996). When banks go bust, their capital base is called to question. Cases of bank failures have motivated researchers to investigate the activities of banks in relation to performance in terms of returns. A view is that consolidation has increased the capital base and size of Nigerian banks but does not necessarily bring about higher performance. Criteria Selecting Nigeria Study Consolidation is a term used by the central bank of Nigeria (CBN) to describe the coming together of some banks within the country to become one bank and be able to meet CBNs requirement for capitalization to a minimum of N25billion. When this happens, it is expected to improve services rendered by the banks. In July 6, 2004, a day now referred to as black Tuesday in banking sector of the economy, the CBN Governor, professor Charles Soludo made an obviously unexpected policy pronouncement. The highlight was the increment of the earlier N2billion to N25 billion, with full compliance deadline fixed for the end of the year 2005. In a bid for banks to meet up with the new requirement, some Banks are exploring the option of inviting foreign investors to buy into Banks. Others are looking at the possibility of getting investors to shore up their capital, and some are looking at the capital market option, while others are considering mergers and acquisition. If the process of consolidation is properly implemented the ongoing consolidation of banks in the country will surely improve the banking sector in Nigeria and translate to better banking services and cheap funds.   More importantly, the public will not have fear of distress in any bank, since the consolidated bank will have enough funds. The need to understand the impact of bank consolidation on Nigerian banks either negative or positive necessitated the use of Nigerian banks as sample for this study. 1.5 Aim To analyze the effect of consolidation on the performance of Nigerian Banks 1.6 Objectives To examine the consolidation process of Nigerian banks. To Asses the performance of Nigerian banks before and after consolidation. To evaluate the impact of consolidation on Nigerian banks. CHAPTER 2: Literature Review 2.1 Introduction This chapter attempts to gain an in-depth view into what is already known in connection with the research topic being studied. It therefore brings to light the different theoretical and methodological approach to the research area, helps develop a practical analytical framework, considers inclusion of variables that may not have been thought about from the inception of the research work and in the long run learning can be gained from mistakes of previous researchers and avoidance of such mistakes would be achieved (Bryman Bell, 2003). The scope of the research is narrowed down through successful study of literature review that was continuous all through the research process. Further, the review of literature will incorporate a wide range of materials sourced from journal articles, corporate websites, government websites, multilateral organisations, text books and online databases which include: Wiley, Science Direct, Emerald and Business Source Premier. Reforms are predicated upon the need for reorientation and repositioning of an existing status quo in order to attain an effective and efficient state. There could be fundamental bottle-neck that may inhibit the functioning of the institutions for growth and the achievement of core objectives in the drive towards enhancing and sustaining the economic and social imperatives of human endeavor. Carried out through either government institutions or private enterprises, reform becomes inevitable in the light of the global dynamic exigencies and emerging landscape. Consequently, the banking sector, as an important sector in the financial landscape, needs to be reformed in order to enhance its competitiveness and capacity to play a fundamental role of financing investment. Many literature indicates that banking sector reforms are propelled by the need to deepen the financial sector and reposition for growth, to become integrated into the global financial architecture; and involve a banking sector that is consulting with regional integration requirements and international best practices. The nexus between consolidation and financial sector stability and growth is explained by two polar views. Proponents of consolidation opined that increase size could potentially increase bank returns, through revenue and cost efficiency gains. It may also, reduce industry risks through the eliminations of weak banks and create better diversification opportunities. On the other hand, it is argued that consolidation could increase banks propensity towards risk taking through increases in leverage and off-balance sheet operations. Advocates Furlong (1994) stated that an early view of consolidation in banking was that it makes banking more cost efficient because larger banks can eliminate excess capacity in areas like data processing, marketing, or overlapping branch networks. Cost efficiency also could increase if more efficient banks acquired less efficient ones. Though studies on efficiency in banking raised doubts about the extent of overcapacity, they did point to considerable potential for improvement in cost efficiency through mergers. Banking reforms involves several elements that are unique to each country based on historical economic and institutional imperatives, for example, in Hungary. Evidence show that the reform in the banking sector was due to high under-capitalization of state owned banks, weakness in the regulation and supervision and deficiencies in corporate governance behavior of banks. Craig and Hardee (2004) conducted investigation on bank consolidation and concluded that as the banking consolidation continues, relationship lending is becoming increasingly rare. As credit scoring and formal, formulaic methods are used more and more, specifically by the large banks, many small businesses may find out that they do not fit the model, especially those enterprises with negative equity. Thus, small businesses may be filling the financing void that is being created by the bank consolidation with non-bank sources of funds. Hughes and Mester (1997) provide evidence to suggest that there are scale economics in banking, bank managers are risk averse, and banks use the level of their financial capital to signal the level of risk. This is an area of interest in Nigerian banking, especially when the return on equity is calculated in another two to three years and then compared with the historical industry average. Rhoades(1996) reported that American banks consolidated in response to the removal of restriction on bank branching across states, while Hughes, J.P; W. Lang; L.J. Mester; C.G. Moon(1998) concluded that the economic benefits of consolidation are strongest for those banks that engaged in interested expansion, and in particular the expansion that diversifies macroeconomic risk. From the literature, it has been observed that well-spaced and implemented financial reforms have the ability to boost financial development indicators. Detractors Hughes J.P; Mester, L.J; and Moon, C.G (2000) also provide evidence that scale economies exist in banking but they fail to account for risk. Thus, scale economies that result from consolidation and diversification do not produce better performance in banking, unless choice makes the banks management more conscious risk and moderates its decisions and actions appropriate larger scale of operation that leads to diversification only reduce liquidity and credit risk under the ceteris bus assumption, and they argued that this is not always the case. The examination of merger and acquisition in European banking and found that industry consolidation was beneficial (by providing social benefits) in the first economic integration stages, but could damage welfare in the more advanced stages as the few big banks safeguard price agreements to forestall foreign competition. The other side to European mergers and acquisitions was because of the possibility of failure. This, of course, ignores the fact that no bank can ever be too big to fail. All it takes for a bank to fail is for bad news? about a bank to get to its stakeholders (especially depositors) and they all walk in at the same time to take their funds! For such bank to survive, it must have sufficient liquid assets to meet all maturing and long-dated obligations (Igangiya, 2006). 2.2 Role of banks In the Economy Banks have an important role to play in an economy, as they are intermediaries between people with shortages and surpluses of capital. The products they offer will include savings, lending, investment, mediation and advice, payments, ownership, guarantee and, trust of real estate. (Bouma et al, 2001). This aspect is critical to this research study as the role of banks in any economy cannot be undermined therefore, the need to explore the effectiveness of their actions and how this ultimately affects the economy. The macroeconomic environment within which firms exist and, operate has an impact upon their activities and governments and other agencies operating at different spatial levels and it can shape behavior and their environment. (Worthington et al, 2001). According to Bouma et al, (2001), as a financial intermediary between market players, a bank has four important functions: First it transforms money by scale. The money surpluses of one person are mostly not the same as the shortages of another person. Banks transform money by duration. Creditors may have short-term surpluses of money, while debtors mostly have a long-term need for money. Banks transform money by spatial location (place). Finally, banks act as assessors of risk. As a rule, banks are better equipped to value the risks of various investments than individual investors who have surpluses available. Also, through their larger scale, banks are more able to spread risks. The major objectives of the banking system are to ensure price stability and facilitate rapid economic development; regrettably, these objectives are still yet to be realised in Nigeria as a result of some infrastructural deficiencies such as basic power, energy, and transportation. Also, the lack of a workable contingency planning framework which provides detailed policy actions to limit crises. The reforms of the banking industry will have an influence on the functions, as it ultimately shapes the way they handle their operations. The reform of recapitalisation and consolidation could mean a larger platform for banks to better carry out their tasks. This literature review takes a look at commercial banks in Nigeria when faced with the reformation of the banking industry, core competences needed by the banks to be successful and the effect on the macroeconomic indicators of the country. 2.3 The concept of capital base The recent call for recapitalization in the banking industry has raised much argument among the bank regulators, promoters and depositors as if shoring up of banks capital base is a new phenomenon in Nigeria. Historically, the failure of pioneer 1930s and 1940s brought about the enactment of banking ordinance of 1952. Banking ordinance of 1952 prescribed an operating license and emphasized on minimum equity capital for all banks (Omoh, 2007). Since then, raising of bank capital has become the hallmark response policy of the Nigerian monetary authorities. Capitalization is an important component of reforms in the banking industry, owing to the fact that a bank with a strong capital base has the ability to absorb losses arising from non-performing liabilities (NPL). Attaining capitalization requirement is achieved through consolidation, convergence as well as the capital market. Thus, banking reforms are primarily driven by the need to achieve the objectives of consolidation, competition and convergence. (Deccan Herald,2004), in the financial architecture. 2.4 The Concept of Bank Consolidation Consolidation is viewed as the reduction in the number of banks and other deposit taking institution with a simultaneous increase in the size and concentration of the consolidation entities in the sector (BIS, 2001:2). It is mostly motivated by technology innovation, deregulation of financial services, enhancing intermediation and increased emphasis on shareholder value, privatization and international competition (Berger et al, 1991). The process of consolidation has been argued to enhance bank efficiency through cost reduction and revenue in the long run. It also reduces industrys risk by eliminating weaker banks and acquiring the smaller ones by bigger and stronger banks as well as creates opportunities for greater diversification and financial intermediation. The pattern of banking system consolidation could be viewed in two different perspectives, namely; market-driven and government-led consolidation. The market-driven consolidation which is more pronounced in the developed countries sees consolidation as a way of broadening competitiveness with added comparative advantage in the global context and eliminating excess capacity more efficiently than bankruptcy or other means of exit. On the other hand, government-led consolidation stems from the need to resolve problem of financial distress in order to avoid systematic crises as well as to restrict inefficient banks (Ajayi, 2005). One of the general effects of consolidation is to the reduction in the number of players, moving the industry more toward an oligopolistic market (Adedipe, 2007). 2.5 Prospect of Bank consolidation In Nigeria The initial public offering by banks through the capital market when completed is likely to increase the level of financial deepening as evidenced in the upsurge in the volume and value of trading in stock market. The reform in the banking industry has been able to attract more foreign investment inflow, especially in the area of portfolio investment; this development if sustained will boost the level of economic activity especially toward non oil sector. The consolidation of banks is likely to attract a significant level of foreign banks entrance into Nigeria which will become a feature in the industry over time. This will bring about more confidence by the international community of the banking sector thereby attracting more foreign investment into the country. As the level of financial intermediation increase, interest rate is likely to fall and increase lending to the real sector that will generate employment and booster growth. 2.6 The Process of Bank consolidation In Nigeria Before any bank can be said to consolidate through merger and acquisition in the Nigeria industry, it must first seek and obtain the approval of the following regulatory and supervisory authorities in the industry. They include the Securities and Exchange Commission (SEC), Central Bank of Nigeria (CBN), Nigeria Stock Exchange (NSE) and the Corporate Affairs Commission (CAC) (CBN, 2004). Chapter 3: Research Methodology Introduction This chapter sets out the method employed in conducting the research. The choice of method was made based on the nature of the research problem. The purpose of this research is to discover, if any, the impact of bank consolidation on bank performance. Effort would be made to ensure that the methodology and conceptual framework adopted in the research are as relevant to the findings as the concepts and theories of the study. This is because the validity and reliability of conclusions are largely influenced by the research process itself. 3.2 Research Design This study is a causal or explanatory analysis since it seeks answers to questions related to the causes and determinants of bank performance. The research adopts a deductive approach. It outlines theories of director relationship to firm performance and draws hypothesis from them. These hypotheses are then tested using empirical social data to either confirm or reject the contentions. 3.3 Quantitative Versus Qualitative Data A clear distinction must be emphasized between quantitative and qualitative data. The former is concerned with the compilation of the results of research in a standardised mathematical form with the analysis conducted by means of statistics. (Saunders et al, 2003, p.378). Here variables are measured on a selection of scales and can then be arranged in order of arithmetical rigour. Conversely qualitative research is subjective in its approach of examining and reflecting on perceptions of understanding social and human activities (Hussey and Hussey, 1997). Qualitative research is inductive and researchers rarely know the specifics of data analysis when they begin a project (Neuman, 2006). It is concerned with the assemblage of data in a non-standardised, descriptive form, with the examination conducted through the use of theoretical models. 3.4 Data Type Raw or summarized data which has already been collected and stored for other purposes aside from that of the research in question is referred to as secondary data (Saunders et al, 2007). This research will make use of multiple-source secondary data collected from bank financial reports and CBN statistical publications available on the CBN, Guaranty trust and zenith banks websites, some paper source of data will also be used. The data/study will be restricted between the period of 2004 and 2006. The year 2004 is the pre-consolidation, 2005 consolidation while 2006 is the post-consolidation periods. The choice of data type is based on accessibility, cost saving and authenticity factors. Sample Selection The representative sample of the Nigerian banking sector to be used as a sample of the population under study is Guaranty Trust Bank PLC and Zenith Bank PLC. CAMEL ANALYSIS CAMEL is derived from the five components of a banks condition which include Capital adequacy, Asset quality, Management, Earnings, and Liquidity. Ratings are assigned for each component, and a composite rating is assigned for the overall condition and performance of the bank. These component and composite ratings are assigned on a scale of 1 to 5, with 1 representing the highest rating (strongest performance) and 5 representing the lowest (weakest performance) (Hirtle and Lopez, 1999). The camel analysis will be used to analyse the performance of banks during the pre-consolidation (2004) and the post-consolidation (2006) periods. Limitation The major difficulty that is likely to be encountered during the course of carrying out this research is the dearth of information, which is usually associated with emerging economies (including the Nigerian economy). Deliberate efforts would therefore be made to obtain information necessary to enhance the quality of the present research. 4.0 CONCLUSION In summary, the research tries to establish that bank consolidation helps in shoring up investment capital, enhances shareholder value, and protects creditors and depositors as well as strengthening banks capacities to attract funds at lower costs enhancing their liquidity positions. An efficient banking system tends to be one of the greatest focuses of the Central Bank of Nigeria since its establishment in 1959. Thus, sufficient capital base has largely constituted the Banks reform policy focus over the years. Hence, it may not be out of place to conclude at this material time that the ongoing reform policy is essential for the attainment of overall macroeconomic stability on a sustainable basis. Accordingly, the Central Bank of Nigeria is admonished to intensify its present efforts geared towards restoration of confidence in the banking system. The research work analyses published audited accounts of two (2) out of twenty-five (25) banks that emerged from the consolidation exercise and data from the Central Banks of Nigeria (CBN). We denote year 2004 as the pre-consolidation and 2005 and 2006 as post-consolidation periods for our analysis. In doing this, efforts would be made to examine empirically how bank consolidation through recapitalization has affected the performance of Nigerian banks during the period covered by the research. The data for the work are from secondary sources and would be obtained exclusively from the Central Bank of Nigeria and bank publications, both electronic and paper form. CAMEL analysis will be employed to analyse the financial data so as to ascertain the relationship between consolidation and bank performance BIBLIOGRAPHY Bernerd, B.P., (2006), The effect of recent changes in the financial sector development in Nigerian, Paper presented at the 15th General Assembly of the African rural and agricultural credit association (AFRACA), Bukina Faso. CBN., (2004), Guidelines and Incentive on Consolidation in consolidating Banking Industry. Charles, C.S. (2004) Consolidating the Nigerian Banking Industry to Meet the Developmental challenges of the 21st century. Paper presented at a meeting of bankers committee Abuja 6 July 2004. Larry, U; et al., (2004) Issues in Financial Institutions Surveillance in Nigeria. A seminar paper by CBN training centre Lagos. Eshodaghor, D.V., (2006), Impact of distressed banks in depressed Economy, Prospects for survival and growth. Bank failure in Nigeria, causes and dimension pp. 17 â€Å" 22. Ezeudusi, F. U., (2002) Marcus, G., (2003), An approach to the consolidation of Banks Merger Issues by regulators., A south African case business paper (4), NDIC Annual Report and Statement of Account . Oviemuno, A.O., (2006) Banking Consolidation in Nigeria and the strategies for Generating better returns. Ogunleye G.A. (2003) The regulatory imperatives of the Universal Banking concept in Nigerian NDIC quarterly, (11) No. (2), pp.20-30 Ochojele, D. I., (2003) The Nigerian banking industry, a review seminar paper. Osaije, E., (1992), Structural adjustment programme in Nigerian economy Victor, Ezeaku., (2003), Consolidation of Nigerian Banking Sector, CBN publication.

My Thoughts on Race

As a young child, I was always thought that race meant what color a person was on the outside. From my family I was taught that there were white people, black people, and Oriental people. Those were the three races of the world. I was raised to believe that white people were the majority and even though I don’t remember being told that being white was the best race to be, I grew up with this feeling because it was inferred enough. I thought Oriental people were rare, blacks lived in cities, and I was lucky to be a white person. In school we were grouped into categories such as â€Å"white†, black†, or â€Å"other† when we had to fill out forms. Those were the three choices given out when asked to check off our race. Later, these forms were amended to include choices such as â€Å"Latino†, â€Å"Asian†, and â€Å"Native American.† Nowadays government/school forms have increased the choices and currently include selections such as â€Å"Pacific Islander† and â€Å"Hispanic/non-Latino†. As these choices increased, I began to see that there were other races beyond the original three of years back, but I still felt I was white and that was a pretty good thing. I know in my early school years we were taught that Martin Luther King Jr. was a hero to this country in a manner of speaking, but we learned little about people of color in general beyond the fact that they were brought to America as slaves hundreds of years ago. For a white child to grow up with very little contact with anybody of color, in a family and community that did not promote racial equality or exposure, I simply gave very little thought to race and just accepted my families views as my own. Somewhere along the path of my education I was taught that there are some diseases that are more likely to occur in people of color, or people with Asian ancestors, or from some European countries. One such example, which I now understand better, is the sickle-cell gene. I either learned it wrong in school or was taught it wrong at the time, but I thought that this was a genetic mutation that only people of color had. The class readings have dispelled this idea completely as now I know it is â€Å"common in tropical Africa, where malaria is widespread. Up to 40 percent of Africans in such areas carry the sickle- cell gene. It's also common in the malaria-ridden Arabian Peninsula and southern India, and rare or absent in the southernmost parts of South Africa.†(Diamond, 1994) Though I long ago kind of gave up that humans could actually be divided neatly into racial groups, this is a reminder of how things we learn long ago stay with us unconsciously. As science progresses information becomes more accurate, and we become old enough to form individual opinions, it is important to be open to this new information and willing to alter what we were taught as children. I happen to be considered white because I am Italian, but what does this really mean? It has certainly kept me from experiencing much racism, especially compared to my friend Deirdre, a woman of color who is married to a German immigrant and having what our culture terms biracial children. That is not to say I have never experienced racism, I think that every person has on some level, I am simply aware that my experiences wane in comparison to what they have probably experienced and will continue to experience. So, I check off â€Å"white† on forms, which ask for my race, or I leave it blank all together. But a Swede is also considered white too. Am I whiter because Swedes are genetically closer to some Africans than they may be to me? The more I think about it, the less sense race makes at all. Race has been debated for hundreds of years and probably longer. And, as far as I know, there has never been one consensus on how many races there are across the planet in which the world wide scientific community has agreed on, despite what was taught years ago. There are many different questions regarding how one would classify races or differences between races, and over the years many different systems of classifications have been used. However, the most used method seems to be by categorizing people based on visible physical characteristics that include skin color, eye color, and shape of the eye. In today’s world, it just makes common sense not to rely on this type of separation of peoples. With so many technological advances in modern times, which allow for very intricate internal and external evaluations, less obvious methods of categorizing people have been begun to be used. In utilizing these new advances it looks like the idea of race has actually collapsed and the theory that humans belong in different racial groups is now practically obsolete. It has been made obvious that a person’s genetic make-up is in part a reflection of where they live as well as their heredity. Each geographic location has very specific weather conditions, specific agriculture, and specific dietary habits of the population, specific diseases to fend off, and other possible factors that may have changed human genetics during the evolution of humans. So why do we still have government forms which ask people to claim they belong to a race, and why do some still even consider race a viable scientific category, and why is it still being discussed as a separator of humans? Really, how can stereotypes of race still prevail when, depending on which criteria is used, a Swede may be linked genetically closer to a Fulani than a Fulani with another person of color from the African continent? (Diamond, 1994) â€Å"People impose order on their social universe by classifying it. These classifications sometimes match genetic relationships and sometimes diverge from them significantly. How we classify is not based on nature, not determined by nature, but is a construction of our social minds that we impose on nature to help us organize things.†(Marks, 2001) Dividing people into race categories has become a comfort factor rather than a matter of science. I think the long term consequences of many whites is that they will be held responsible for the creation of races as a concept and for the ways in which early scientists classified people by race. I also think that the tensions felt between peoples of different colors may be a long-term consequence of whites proclaiming superiority over all others either by direct actions or by inferences. Some Native-Americans blame the government for the situations of their modern tribes. As such, they fought and won the right to receive special treatment by the government by being taxed less and by having certain gaming privileges, and possibly by other means I do not know of, because of the way the whites that first came to America treated them. Some people of color are actively seeking reparations from the United States government because some of their ancestors may have been slaves of America’s early white residents. Because the government allows the Native-Americans special privileges, they are conceding that the early whites in America did something wrong, which I happen to agree they did. But, by continuing to behave as if whites and Native-Americans are separate races, even if only on forms and in certain minds, the race myth will not go away. If the American government concedes to reparations to blacks for something ignorant whites did centuries ago, we will be further drawing a line between populations of humans that do not need to exist. So, the early white scientists classified race before the information known about humans today existed. They created a world that believed their scientific theories because most people did not know any better. And after hundreds of years of believing what we were told as fact and not fiction, it may very well take another hundred or more years to dispel the myth of race. The sense of comfort that propels us to sort people into groups is also a case of fear overriding reason. The Ku Klux Klan could not exist with the fear of other races, even if many racists would deny this. Just as there are many so-called white people who discriminate against blacks, Chinese, or other people, there are many non-white groups of people that discriminate against whites or other people different than themselves. A Chinese father may insist his daughter marry a Chinese man for the simple reason that he has accepted that they are of the same race, and a white man would not be, because that is how he has been taught throughout his life. Even if there were such thing as races of people, how would one define their race in a world where everybody intermingles? If a man marries a Chinese woman, what would their children’s race be? The government/school forms always ask that a person select only one race on certain forms. If their children put â€Å"white† down, they are denying their Chinese heritage. If they put â€Å"Chinese,† â€Å"Oriental† or whatever it is that a person of Chinese heritage would fit under, they would be denying another side of the family. Why should any humans be asked to deny one part of themselves and embrace only one segment of who they are? The bottom line of the future is that governments and major scientific organizations often set the tone for how populations treat and understand the concept of race. Until governments and major corporations stop circulating the concept of race and until the concept of cultures are embraced rather than race, the separation of peoples by race will never be dispelled. Sources: 1) Diamond, Jared. â€Å"Race Without Color.†Ã‚   Discover 15.11 November 1994. 2) Marks, J. (2001)   Scientific and folk ideas about heredity.   In: The Human Genome Project and Minority Communities: Ethical, Social, and Political Dilemmas, ed. by R. Zilinskas and P. Balint.   Westport, CT: Greenwood, pp. 53-66. My Thoughts on Race As a young child, I was always thought that race meant what color a person was on the outside. From my family I was taught that there were white people, black people, and Oriental people. Those were the three races of the world. I was raised to believe that white people were the majority and even though I don’t remember being told that being white was the best race to be, I grew up with this feeling because it was inferred enough. I thought Oriental people were rare, blacks lived in cities, and I was lucky to be a white person. In school we were grouped into categories such as â€Å"white†, black†, or â€Å"other† when we had to fill out forms. Those were the three choices given out when asked to check off our race. Later, these forms were amended to include choices such as â€Å"Latino†, â€Å"Asian†, and â€Å"Native American.† Nowadays government/school forms have increased the choices and currently include selections such as â€Å"Pacific Islander† and â€Å"Hispanic/non-Latino†. As these choices increased, I began to see that there were other races beyond the original three of years back, but I still felt I was white and that was a pretty good thing. I know in my early school years we were taught that Martin Luther King Jr. was a hero to this country in a manner of speaking, but we learned little about people of color in general beyond the fact that they were brought to America as slaves hundreds of years ago. For a white child to grow up with very little contact with anybody of color, in a family and community that did not promote racial equality or exposure, I simply gave very little thought to race and just accepted my families views as my own. Somewhere along the path of my education I was taught that there are some diseases that are more likely to occur in people of color, or people with Asian ancestors, or from some European countries. One such example, which I now understand better, is the sickle-cell gene. I either learned it wrong in school or was taught it wrong at the time, but I thought that this was a genetic mutation that only people of color had. The class readings have dispelled this idea completely as now I know it is â€Å"common in tropical Africa, where malaria is widespread. Up to 40 percent of Africans in such areas carry the sickle- cell gene. It's also common in the malaria-ridden Arabian Peninsula and southern India, and rare or absent in the southernmost parts of South Africa.†(Diamond, 1994) Though I long ago kind of gave up that humans could actually be divided neatly into racial groups, this is a reminder of how things we learn long ago stay with us unconsciously. As science progresses information becomes more accurate, and we become old enough to form individual opinions, it is important to be open to this new information and willing to alter what we were taught as children. I happen to be considered white because I am Italian, but what does this really mean? It has certainly kept me from experiencing much racism, especially compared to my friend Deirdre, a woman of color who is married to a German immigrant and having what our culture terms biracial children. That is not to say I have never experienced racism, I think that every person has on some level, I am simply aware that my experiences wane in comparison to what they have probably experienced and will continue to experience. So, I check off â€Å"white† on forms, which ask for my race, or I leave it blank all together. But a Swede is also considered white too. Am I whiter because Swedes are genetically closer to some Africans than they may be to me? The more I think about it, the less sense race makes at all. Race has been debated for hundreds of years and probably longer. And, as far as I know, there has never been one consensus on how many races there are across the planet in which the world wide scientific community has agreed on, despite what was taught years ago. There are many different questions regarding how one would classify races or differences between races, and over the years many different systems of classifications have been used. However, the most used method seems to be by categorizing people based on visible physical characteristics that include skin color, eye color, and shape of the eye. In today’s world, it just makes common sense not to rely on this type of separation of peoples. With so many technological advances in modern times, which allow for very intricate internal and external evaluations, less obvious methods of categorizing people have been begun to be used. In utilizing these new advances it looks like the idea of race has actually collapsed and the theory that humans belong in different racial groups is now practically obsolete. It has been made obvious that a person’s genetic make-up is in part a reflection of where they live as well as their heredity. Each geographic location has very specific weather conditions, specific agriculture, and specific dietary habits of the population, specific diseases to fend off, and other possible factors that may have changed human genetics during the evolution of humans. So why do we still have government forms which ask people to claim they belong to a race, and why do some still even consider race a viable scientific category, and why is it still being discussed as a separator of humans? Really, how can stereotypes of race still prevail when, depending on which criteria is used, a Swede may be linked genetically closer to a Fulani than a Fulani with another person of color from the African continent? (Diamond, 1994) â€Å"People impose order on their social universe by classifying it. These classifications sometimes match genetic relationships and sometimes diverge from them significantly. How we classify is not based on nature, not determined by nature, but is a construction of our social minds that we impose on nature to help us organize things.†(Marks, 2001) Dividing people into race categories has become a comfort factor rather than a matter of science. I think the long term consequences of many whites is that they will be held responsible for the creation of races as a concept and for the ways in which early scientists classified people by race. I also think that the tensions felt between peoples of different colors may be a long-term consequence of whites proclaiming superiority over all others either by direct actions or by inferences. Some Native-Americans blame the government for the situations of their modern tribes. As such, they fought and won the right to receive special treatment by the government by being taxed less and by having certain gaming privileges, and possibly by other means I do not know of, because of the way the whites that first came to America treated them. Some people of color are actively seeking reparations from the United States government because some of their ancestors may have been slaves of America’s early white residents. Because the government allows the Native-Americans special privileges, they are conceding that the early whites in America did something wrong, which I happen to agree they did. But, by continuing to behave as if whites and Native-Americans are separate races, even if only on forms and in certain minds, the race myth will not go away. If the American government concedes to reparations to blacks for something ignorant whites did centuries ago, we will be further drawing a line between populations of humans that do not need to exist. So, the early white scientists classified race before the information known about humans today existed. They created a world that believed their scientific theories because most people did not know any better. And after hundreds of years of believing what we were told as fact and not fiction, it may very well take another hundred or more years to dispel the myth of race. The sense of comfort that propels us to sort people into groups is also a case of fear overriding reason. The Ku Klux Klan could not exist with the fear of other races, even if many racists would deny this. Just as there are many so-called white people who discriminate against blacks, Chinese, or other people, there are many non-white groups of people that discriminate against whites or other people different than themselves. A Chinese father may insist his daughter marry a Chinese man for the simple reason that he has accepted that they are of the same race, and a white man would not be, because that is how he has been taught throughout his life. Even if there were such thing as races of people, how would one define their race in a world where everybody intermingles? If a man marries a Chinese woman, what would their children’s race be? The government/school forms always ask that a person select only one race on certain forms. If their children put â€Å"white† down, they are denying their Chinese heritage. If they put â€Å"Chinese,† â€Å"Oriental† or whatever it is that a person of Chinese heritage would fit under, they would be denying another side of the family. Why should any humans be asked to deny one part of themselves and embrace only one segment of who they are? The bottom line of the future is that governments and major scientific organizations often set the tone for how populations treat and understand the concept of race. Until governments and major corporations stop circulating the concept of race and until the concept of cultures are embraced rather than race, the separation of peoples by race will never be dispelled. Sources: 1) Diamond, Jared. â€Å"Race Without Color.†Ã‚   Discover 15.11 November 1994. 2) Marks, J. (2001)   Scientific and folk ideas about heredity.   In: The Human Genome Project and Minority Communities: Ethical, Social, and Political Dilemmas, ed. by R. Zilinskas and P. Balint.   Westport, CT: Greenwood, pp. 53-66.

Underage Drinking Is A Growing Problem Essay - 1438 Words

Underage Drinking In America, teenagers abuse alcohol more than any other substance. Studies have shown by age 15, about 33 percent of teens have had at least 1 drink. Underage drinking is a problem that needs to be addressed because drinking can lead to dangerous situations since you are impaired and can be life threatening. The consumption of alcohol in kids under the age of 21 is responsible for 1,580 deaths from motor vehicle crashes, 1,269 from homicides, 245 from alcohol poisoning, falls, burns, and drowning, and 492 from suicides each year. Other than these life threatening consequences, there are also significant repercussions that can change the rest of teenagers’ lives. Many kids think it will not affect their future or that none of the bad things will happen to them, but this is not always the case. The only safe way to make sure you’re not the one in the hospital or suffering is the consequences is to not do it at all. Underage drinking is a growing problem that involves many consequences such as immediate health risks, violence, and problems later in life. Drinking at a young age has psychological risks associated with it. Alcohol can make some teens depressed. People who already suffer from depression and then drink can suffer greatly. Alcohol is a depressant and if the person gets too depressed they can kill themselves. Suicide is the 10th most common cause of death and there is a high correlation of people who kill themselves and people who drinkShow MoreRelatedUnderage Drinking1369 Words   |  6 PagesUnderage Drinking Introduction Underage drinking has long been, and continues to be, a serious public health concern. â€Å"Teen alcohol use kills more than 4700 people each year and high school students who use alcohol or other drugs are five times more likely to drop out of school† (MADD, 2014) than kids who do not. 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Mesoamerican Stronghold Against the Aztecs

Tlaxcallan was a Late Postclassic period city-state, built beginning about 1250 AD on the tops and slopes of several hills on the east side of the Basin of Mexico near modern-day Mexico City. It was the capital of a territory known as Tlaxcala, a relatively small polity (1,400 square kilometers or about 540 square miles), located in the northern portion of the Pueblo-Tlaxcala region of Mexico today. It was one of a few stubborn hold outs never conquered by the powerful Aztec Empire. It was so stubborn that Tlaxcallan sided with the Spanish and made the overthrow of the Aztec empire possible. A Dangerous Enemy The Texcalteca (as the people of Tlaxcala are called) shared technology, social forms and cultural elements of other Nahua groups, including the origin myth of Chichemec migrants settling central Mexico and the adoption of farming and culture of the Toltecs. But they viewed the Aztec Triple Alliance as a dangerous enemy, and fiercely resisted the placement of an imperial apparatus into their communities. By 1519, when the Spanish arrived, Tlaxcallan held an estimated 22,500-48,000 people in an area of just 4.5 square kilometers (1.3 square miles or 1100 acres), with a population density of about 50-107 per hectare and domestic and public architecture covering about 3 sq km (740 ac) of the site. The City Unlike most Mesoamerican capital cities of the era, there were no palaces or pyramids at Tlaxcallan, and only a relatively few and small temples. In a series of pedestrian surveys, Fargher et al. found 24 plazas dispersed around the city, ranging in size from 450 to 10,000 square meters--up to about 2.5 acres in size. The plazas were designed for public use; some small low temples were created at the edges. None of the plazas seems to have played a central role in the life of the city. Each plaza was surrounded by terraces on top of which were built ordinary houses. Little evidence of social stratification is in evidence; the most labor-intensive construction in Tlaxcallan is that of the residential terraces: perhaps 50 kilometers (31 miles) of such terraces were made in the city. The main urban zone was divided into at least 20 neighborhoods, each focused on its own plaza; each one was likely administered and represented by an official. Although there is no governmental complex within the city, the site of Tizatlan, located about 1 km (.6 mi) outside of the city across unoccupied rugged terrain may have acted in that role. Governmental Center of Tizatlan Tizatlans public architecture is the same size as the Aztec king Nezahualcoyotls palace in Texcoco, but instead of the typical palace layout of small patios surrounded by large numbers of residential rooms, Tizatlan is made up of small rooms surrounded by a massive plaza. Scholars believe it functioned as a central place for the pre-conquest territory of Tlaxcala, serving as many as 162,000 to 250,000 persons dispersed throughout the state in about 200 small towns and villages. Tizatlan had no palace or residential occupation, and Fargher and colleagues argue that the location of the site outside of town, lacking residences and with little rooms and big plazas, is evidence that Tlaxcala functioned as an independent republic. The power in the region was placed in the hands of a ruling council rather than a hereditary monarch. Ethnohistoric reports suggest that a council of between 50-200 officials governed Tlaxcala. How They Maintained Independence The Spanish conquistador Hernà ¡n Cortà ©s said the Texcalteca kept their independence because they lived in freedom: they had no ruler-centered government, and the society was egalitarian compared to much of the rest of Mesoamerica. And Fargher and associates think thats right. Tlaxcallan resisted incorporation into the Triple Alliance empire despite being completely surrounded by it and despite numerous Aztec military campaigns against it. Aztec attacks on Tlaxcallan were among the bloodiest of battles waged by the Aztecs; both early historical sources Diego Muà ±oz Camargo and the Spanish inquisition leader Torquemada reported stories about the defeats that pushed the last Aztec king Montezuma to tears. Despite Cortes admiring remarks, many ethnohistoric documents from the Spanish and Native sources state that the continued independence of the Tlaxcala state was because the Aztecs allowed their independence. Instead, the Aztecs claimed they purposefully used Tlaxcallan as a place to provide military training events for Aztec soldiers and as a source for obtaining sacrificial bodies for imperial rituals, known as the Flowery Wars. There is no doubt that the ongoing battles with the Aztec Triple Alliance were costly to Tlaxcallan, interrupting trade routes and creating havoc. But as Tlaxcallan held its own against the empire, it saw an enormous influx of political dissidents and uprooted families. These refugees included Otomi and Pinome speakers fleeing imperial control and warfare from other polities who fell to the Aztec empire. The immigrants augmented Tlaxcalas military force and were fiercely loyal to their new state. Tlaxcallan Support of the Spanish, or Vice Versa? The main storyline about Tlaxcallan is that the Spanish were able to conquer Tenochtitlan only because the Tlaxcaltecas defected from the Aztec hegemony and threw their military support behind them. In a handful of letters back to his king Charles V, Cortes claimed that the Tlaxcaltecas became his vassals and that they were instrumental in helping him defeat the Spanish. But is that an accurate description of the politics of the Aztec fall? Ross Hassig (1999) argues that the Spanish accounts of the events of their conquest of Tenochtitlan are not necessarily accurate. He argues specifically that Cortes claim that the Tlaxcaltecas were his vassals is disingenuous, that they had very real political reasons to support the Spanish. The Fall of an Empire By 1519, Tlaxcallan was the only polity left standing: they were completely surrounded by the Aztecs and saw the Spanish as allies with superior weapons (cannons, harquebuses, crossbows, and horsemen). The Tlaxcaltecas could have defeated the Spanish or simply withdrawn when they appeared in Tlaxcallan, but their decision to ally with the Spanish was a savvy political one. Many of the decisions made by Cortes--such as the massacre of the Chololtec rulers and selection of a new noble to be king--had to have been plans devised by Tlaxcallan. After the death of the last Aztec king, Montezuma (aka Moteuczoma), the remaining true vassal states to the Aztecs made the choice to support them or throw in with the Spanish--most chose to side with the Spanish. Hassig argues that Tenochtitlan fell not as a result of the Spanish superiority, but at the hands of tens of thousands of angry Mesoamericans. Sources Carballo DM, and Pluckhahn T. 2007. Transportation corridors and political evolution in highland Mesoamerica: Settlement analyses incorporating GIS for northern Tlaxcala, Mexico. Journal of Anthropological Archaeology 26:607–629.Fargher LF, Blanton RE, and Espinoza VYH. 2010. Egalitarian ideology and political power in prehispanic central Mexico: the case of Tlaxcallan. Latin American Antiquity 21(3):227-251.Fargher LF, Blanton RE, Heredia Espinoza VY, Millhauser J, Xiuhtecutli N, and Overholtzer L. 2011. Tlaxcallan: the archaeology of an ancient republic in the New World. Antiquity 85(327):172-186.Hassig R. 1999. War, politics and the conquest of Mexico. In: Black J, editor. War in the Early Modern World 1450-1815. London: Routledge. p 207-236.Millhauser JK, Fargher LF, Heredia Espinoza VY, and Blanton RE. 2015. The geopolitics of obsidian supply in Postclassic Tlaxcallan: A portable X-ray fluorescence study. Journal of Archaeological Science 58:133-146.