A POST CONSOLIDATION ANALYSIS OF RECAPITALIZATION AND LENDING BEHAVIOUR IN NIGERIAN BANKING SECTOR

Abstract

Banking reforms have been a persistent process globally. In Nigeria, banking reforms began as a result of banking crisis due to extreme under-capitalization. Although several studies have been conducted on banks’ lending globally, however literature revealed that the precise relationship that exists between bank lending and capitalization has been inconclusive. While most studies on the subject reported a significant relationship between bank lending and capitalization; others reported no significant relationship between bank lending and capitalization. Using correlational research design, this study examines the relationship between banks’ capitalization and lending behaviour in Nigeria. A census study was conducted on the population of 22 deposit money banks operating in Nigeria as at December, 2012. Information obtained from the audited annual reports of the banks was subjected to regression analysis; the result revealed that there is no significant relationship between lending and capitalization in Nigerian banks. The study recommended to management of banks to make efforts to boost banks’ lending level with the increase in capitalization.