RECAPITALIZATION AND BANK PERFORMANCE IN NIGERIA. A RESEARCH PROJECT MATERIAL ON BANKING AND FINANCE
The study focuses on recapitalization and bank performance in Nigeria. It revolves round the happenings in the banking industry pre-recapitalization, and how the recapitalization exercise has affected the banking industry.
It also seeks to mirror into the future to know what challenges and prospects lie ahead.
To achieve the objectives of this study, quantitative data was gotten from secondary sources ,and random sampling technique was utilized in selecting a sample size of sixteen Banks representing 67% of the total population.
The Ordinary Least Square technique of regression analysis was used to estimate the parameters of the model.
In the course of this study, it was observed that a significant relationship exists between profit of banks and recapitalization which is in line with our theoretical expectation. It was also discovered that there are other factors outside the locus of control of banks that affects lending rate. Such factors as inflation, general micro economic factors, monetary policy, amongst others.
The study also revealed that there is no significant relationship between Recapitalization and shareholders funds, which also contradicts our apriori expectation.
As a results of the findings, recommendations were made; and some of them are;
Recapitalization should be sustained until Nigerian banks are among the first 100 banks in the world.
Standard regulations should be enacted in order to control bank services to prevent exploitation tendencies.
Various types of competitions should be stimulated thereby pushing Nigerian banks towards global trends.
Apex banks should perform their duties effectively and modern banking practice should be transmitted from advanced countries.
1.0 BACKGROUND TO THE STUDY
The process of recapitalization has been in existence right from the 1980’s, but it is more intensified in recent time because of the impact of globalization which is precipitated by continuous integration of the world market and economies.
Recapitalization is the substantial injection of capital into a company. This implies making the company more solid or stronger by increasing its capital base (Unugbro 2009).
It is predicated upon the need for re-orientation and re-positioning of an existing status quo so as to attain and sustain an efficient and effective state of affairs.
The Nigerian banking sector was recapitalized through the regulatory powers of the Central Bank of Nigeria in line with its 13-points reform agenda. This was the first of the 13-points reform agenda because the banking sector plays an unparalleled role in the growth and development of any economy irrespective of its level of development (i.e. underdeveloped, developing or developed) by its intermediate function and visible multiplier effect on the economy (Abosede 2004).
In Nigeria, the reforms in the banking sector preceded against the backdrop of banking crisis due to highly undercapitalized deposit taking banks, weakness in the regulatory and supervisory framework, weak management practices, and the tolerance of deficiency in the corporate governance behavior of banks (Uchendu 2005).