Universal Journal of Applied Science Vol. 2(4), pp. 83 - 91
DOI: 10.13189/ujas.2014.020403
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Is Increasing Bank Capital the Solution to Improving Bank Liquidity and Preventing Bank Distress in Nigeria?


Eferakeya Idowu *
Department of Accounting, Banking and Finance, Delta State University, Asaba Campus, Asaba

ABSTRACT

This paper examined the relationship between bank liquidity ratio, asset quality, bank distress and bank minimum capital requirement in Nigeria for the period 1990-2006.The study used secondary data obtained from banks financial records, CBN statistical bulletin, NDIC report and International Financial Statistics 2010. The E-view 7 statistical software was used to analyse the data and test the hypotheses .The study found out that (i) there is a positive relationship between minimum capital requirement and liquidity ratio which is not statistically significant (ii)A positive relationship exist between minimum capital requirement and asset quality, though statistically insignificant (iii) A negative relationship exist between minimum capital requirement and number of distressed banks which is also not statistically significant. The study recommends that apart from increasing minimum capital requirement, a closer and regular examination of liquidity ratio and asset quality of banks is required. In addition, other components of banks regulatory reform such as enforcement of code of corporate governance, closer collaboration with anti graft agency (EFCC), zero tolerance on misreporting, adoption of risk-based supervision and host of others should be considered. A holistic reform of this nature is capable of stemming proactively the tide of banks failure/distress as well as improving liquidity ratio and asset quality.

KEYWORDS
Bank Minimum Capital, Liquidity Ratio, Asset Quality, Bank Distress

Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] Eferakeya Idowu , "Is Increasing Bank Capital the Solution to Improving Bank Liquidity and Preventing Bank Distress in Nigeria?," Universal Journal of Applied Science, Vol. 2, No. 4, pp. 83 - 91, 2014. DOI: 10.13189/ujas.2014.020403.

(b). APA Format:
Eferakeya Idowu (2014). Is Increasing Bank Capital the Solution to Improving Bank Liquidity and Preventing Bank Distress in Nigeria?. Universal Journal of Applied Science, 2(4), 83 - 91. DOI: 10.13189/ujas.2014.020403.