Adegbaju, A. A. and Olokoyo, F. O.
(2008)
Recapitalization and Banks’ Performance: A Case Study of Nigerian Banks.
African Economic and Business Review, 6 (1).
ISSN 1109-5609
Abstract
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.
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