EFFECTS OF BANK RECAPITALISATION ON NIGERIAN BANKING SYSTEM

Abstract

The aim of the thesis is to investigate the effect of bank recapitalisation on Nigeria banking system. Bank recapitalization increases an amount of long term finances used in financing the organization. The existence of effect of bank recapitalization in the Nigerian banking sector is estimated using an autoregressive regression model. To estimate the regression model data from pre and post-recapitalization periods of the Nigeria banking industry was used. The data were collected from money and credit statistics department of the CBN. Several banking variables were used to check the effect of recapitalization. The variables are base money, broad money, credit to government, credit to private sector, demand deposits, narrow money, net domestic credit, net foreign assets for the 2000-2016 period. At first, descriptive statistics of the variables are investigated. After interpretation of the descriptive statistics of the variables for both before and after recapitalisation period seasonality of the series are investigated. Based on the seasonality results all series are seasonally adjusted. Rest of the empirical application is done by using seasonally adjusted series. After these, the unit root test used to determine integration level of the variables. At last autoregressive models are estimated using stationary series for each variable. In these models the dummy variable used to see if there is a change after recapitalization period. The results prove that recapitalization increases base and broad money of a commercial bank and it ensures more liquidity. The results also prove that after recapitalisation, a stronger and more stable banking system is seen.