Post-recapitalization in Nigeria: how adequate is capital?

Abstract

Bank capital is one of the protective and necessary parameters for better performance in any banking system. This may explain why the industry in Nigeria has been constantly recapitalized for sectorial enhancement. Given the various bank capital reforms the sectors have undergone and a number of interventions, the question arose: How adequate is capital? The study used descriptive statistics and Levene’s test for equality of variance, as well as an independent sample t-test to look at the (10) ten various performance parameters for both pre- and post- recapitalization periods. From the results of the analysis, most of the performance parameters did not improve after post-recapitalization. This answers the question posed by the study that capital is not adequate in the Nigerian banking sector. Therefore, there is a need to inject more bank capital into the Nigerian banking sector if this sector must have a greater impact and respond to the challenges of the Nigerian economy for sustainable growth and development.

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

“…Given these obvious realities, it follows that the post-recapitalization period saw additional problems in the banks as a result of some interdependent factors such as macroeconomic instability caused by the sudden influx of large amounts of capital, poor corporate governance in these banks, lack of transparency in the disclosure of the banks' financial standings, the continuous wide gaps in financial regulations and laws, and unstructured management. In addition, the Nigerian banking system's post-recapitalization experience included the injection of NGN 620 billion bailout funds to save most recapitalized banks, the sacking of indicted bank CEOs and the appointment of advisers to these banks, bank restructuring and huge impaired shareholders' funds, huge non-performing loan exposure, and the establishment of the Asset Management Corporation of Nigeria (Offiong, Riman, James, Okon & Ogar, 2020). As a result, certain large and wellknown banks, including Oceanic, Intercontinental, Diamond, Afri, Skye, and, most recently, Union, that made it through the recapitalization period are no longer operating because to the aforementioned issues.…”