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.
