An Assessment of Banking Sector Recapitalization and Performance of Deposit Banks in Nigeria

Prof Ime T Akpan; Itoro Patrick Sambo

doi:10.56201/ijssmr.vol.11no9.2025.pg340.355

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An Assessment of Banking Sector Recapitalization and Performance of Deposit Banks in Nigeria

Prof Ime T Akpan, Itoro Patrick Sambo

Abstract

This article investigates the effect of recapitalization on the performance of deposit banks in Nigeria, particularly in the context of recent macroeconomic challenges and the Central Bank of Nigeria new proposed recapitalization policy slated for implementation beginning in 2025. Despite previous consolidation reforms in 2004–2005 that raised the minimum capital base to ?25 billion and reduced the number of banks to 25, the sector continues to face issues related to inadequate capital buffers, weak intermediation, and exposure to systemic risks. The article employed an ex-post facto research design and panel least squares regression, analyzing secondary data from 2010 to 2023 across five leading Nigerian banks (such as Access Bank, Zenith Bank, First Bank, Stanbic IBTC, and Ecobank). Key performance indicators such as Return on Assets (ROA), Capital Adequacy Ratio (CAR), Liquidity Ratio, and Non-Performing Loan Ratio (NPLR) were used to assess bank performance, three hypotheses were tested. The findings revealed that recapitalization has a statistically significant positive effect on profitability, liquidity, and asset quality, though the impact varies across banks. The results support both the Financial Intermediation Theory and Capital Buffer Theory, emphasizing the role of robust capital structures in ensuring financial stability, profitability, and efficient risk management. The article concludes that while recapitalization is a vital regulatory tool, it must be complemented by broader reforms in corporate governance, risk management, and financial innovation to achieve a resilient banking system. The findings offer timely insights for policymakers, regulators, and stakeholders as Nigeria prepares for a new era of financial sector transformation.

References

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An Assessment of Banking Sector Recapitalization and Performance of Deposit Banks in Nigeria

Abstract

References

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