CAPITAL ADEQUACY AND BANKS PERFORMANCE: AN EMPIRICAL INVESTIGATION OF THE NIGERIAN DEPOSIT MONEY BANKS
Recent developments in the Nigerian banking sector, despite the restructuring exercise, have raised a lot of concern for banks to hedge and keep their capital base against the risk they are exposed to. This study provides an empirical investigation of the effects of capital adequacy on bank performance in Nigeria deposit money banks for seven year period, spanning from 2006-2012. The annual reports of fifteen deposit money banks out of the twenty four banks were the major source of information on some important variables of interest such as loans and advances, customers’ deposit, shareholders’ fund, total assets and profit after tax. Both descriptive statistics and inferential statistics were employed to analyze the data and to provide evidence for the research objectives raised. Using panel data regression models the result revealed that Customers’ Deposits and Total Assets are positively significant at 10% and 5% level of significance respectively with Profit after Tax while Shareholder’s Fund shows a negative significant relationship at 10% level of significance. Based on these findings, the study recommends that Nigerian banks should increase their customer base and encourage the citizenry on banks savings culture in order to improve on their existing customers deposit while government on its part should put in place necessary regulatory framework to encourage savings culture among the populace geared towards improving customers’ deposit. Consequently, the government through the CBN should realign the regulatory framework on the existing shareholders’ fund through appropriate pronouncements and guidelines in an attempt to provide better performance in the Nigerian banking sector.
