Recapitalization and Banks’ Performance: A Case Study of Nigerian Banks

The resultant effect of financial liberalization opened up the Nigerian economy to global financial markets, which has generated increasing apprehension in the economy and has exposed the fragility and vulnerability of her financial system. It is therefore imperative for the Central Bank of Nigeria to introduce measures that will reduce the exposure and enhance the stability of the nation’s financial system. A defensive measure that will strengthen the existing banks and put the new ones on a good start up is needed, hence the introduction of a new capital base of N25billion. This study investigated the impact of previous recapitalization in the banking system on the performance of the banks in the country with the aim of finding out if the recapitalization is of any benefit. The study employed secondary data obtained from NDIC annual reports. The data were analyzed using both descriptive e.g. means and standard deviations and analytical techniques such as the t-test and the test of equality of means. It was found that the mean of key profitability ratio such as the Yield on earning asset (YEA), Return on Equity (ROE) and Return on Asset (ROA) were significant meaning that there is statistical difference between the mean of the bank before 2001 recapitalization and after 2001 recapitalization. The study recommends that the banks should improve on their total asset turnover and to diversify their funds in such a way that they can generate more income on their assets, so as to improve their return on equity.