EFFECT OF RECAPITALIZATION ON LIQUIDITY AND PROFITABILITY OF BANKS IN NIGERIA

ABSTRACT

The banking sector of our time has been distinguished from other related financial sector because of the numerous services and assistance it can render to the people and the economy at large. The banking sector of Nigeria requires day to day regulation to bring the sector to standard and out of crises.

Therefore, to create awareness on the management of this sector and the impact of the regulatory authority (CBN) on this sector is one of the factors that induced the caring out of this project.

The methodology of this project follows series of procedures. One of the procedures is the use of questionnaires to obtain primary data used for the analysis of the project and a statistical model called chi­square was used to analyze the answers gotten from the questionnaires. Moreso, Textbooks, Newspapers and CBN Bullions were also used as secondary data.

Findings from the analysis shows that, recapitalization actually has a great effect on the profitability and liquidity of banks in Nigeria. Thus, the hypotheses were tested rightly and positive result was obtained at the end of analysis. For instance, the analysis revealed that the increase in capital base has actually enhanced banks' liquidity and profitability as majority of the respondents supported the statement in the analysis.

Finally, it is suggested that, the current capital base (25 billion) should be maintained to a reasonable point before another increment. As a new increase of capital base at an earlier stage can affect the banks' operation. Also, the CBN as regulatory in authority should put in place effective measures to checkmate issues of mismanagement of funds in banks.

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