Bank distress, supervision and consolidation in Nigeria, sets out as its central objective and attempt to examine the impact of banking supervision on effective consolidation in Nigeria. The study reveals that loan quality, liquidity and capital base have significant impact on banking system consolidation. The analysis leads to the conclusion that the monetary authorities have only partially succeeded in strengthening the consolidation process. Additionally, there was a seeming failure of monetary authorities to employ appropriate supervisory mechanism to address liquidity problems in the Nigeria Banking Industry.