The Effect of Recapitalization on Performance of Deposit Money Banking in Nigeria

Abstract

This study examined the effect of banks' recapitalization on the performance of Deposit Money Banks in Nigeria, from 2000 to 2020. The study serves as a barometric measurement of the pre- and post-recapitalization performance of Nigerian banks given the problematic issues that keep arising in the banking system even after the consolidation. Data for the study were collected from the annual reports of 11 Commercial Banks in Nigeria, from 2005 to 2020 recapitalization periods. The study employed the CAMEL Composite Rating Ratios to classify the performance of each bank in the post consolidation period. Findings of the study revealed that Nigerian banks were adequately capitalized in the post-consolidation era. It was also discovered that these banks maintained strong earnings in that same period, whereas liquidity was poor in post-consolidation era. The study moreover revealed that asset quality was very poor, while management operational efficiency is averagely adequate. The study therefore recommends that to checkmate the incidence of increasing non-performing loans in the banking sector, the CBN should as a matter of urgency put stringent oversight measures to ensure that credits are only advanced to viable businesses.