Determinants of Capital Adequacy in Deposit Money Banks: Evidence from Nigeria

Henry Ikechukwu Onwere

Journal of Empirical Economics, 2015, vol. 4, issue 6, 337-346

Abstract: The research sets out to examine the impact of capital adequacy in the banking sub-sector and the growth of Nigeria’s economy. It specifically seeks to ascertain the effect of bank capital base and macroeconomic variables. Data set from Central Bank of Nigeria statistical bulletin (2014) during the period 1984-2014 was used. The error correction framework and co-integration techniques to test the relationship between bank capital base and macroeconomics variables were employed. Findings from the study indicates that political stability may reduce financial distress and bankruptcy while foreign investment will affect Banks capital in a developing economy like Nigeria in a period of financial crisis. However, the study also established a negative relationship between inflation and banks capital base as deposit money banks had their capital eroded due to inflation. The study made some recommendations for Nigeria’s policy makers which include the regulation of foreign investment and the use of monetary policy to keep inflation rate at a minimum level, if possible below 5% to enable deposit money banks in Nigeria compete globally and operate efficiently.

Keywords: Capital adequacy; Macroeconomics Variables; Global Credit Crunch. (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:rss:jnljee:v4i6p4

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