Analysis of the Impact of Increased Capital Requirements on the Operational Efficiency of Nigerian Commercial Banks

Otohinoyi, Ozovehe Peter

Citation: Otohinoyi, Ozovehe Peter, "Analysis of the Impact of Increased Capital Requirements on the Operational Efficiency of Nigerian Commercial Banks", Universal Library of Business and Economics, Volume 02, Issue 04.

Copyright: This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

The study examines the short-run effects of Nigeria’s 2024 recapitalization policy—which raised minimum paid-up capital to ?500 billion, ?200 billion, and ?50 billion for international, national, and regional banks respectively—alongside Basel III liquidity standards, on the operational efficiency of Nigerian commercial banks. This study looks at how higher capital and liquidity requirements affected the performance of Nigerian banks. It focuses on profitability, cost efficiency, and resilience, and also checks if capital adequacy and liquidity played any moderating role. The analysis is based on secondary data from 2011 to 2024, taken from CBN, IMF, and other published sources. Trends in Capital Adequacy Ratio (CAR), Liquidity Ratio, Return on Assets (ROA), and cost-to-income ratio were compared over time. The findings show that efficiency in the Nigerian banking sector did not fall after the policy was introduced. Bigger banks handled the change better, while smaller ones had a harder time meeting the new capital targets. The study gives some useful perspective for regulators and managers who are trying to keep a balance between strict prudential standards and everyday operational results, which is an important issue for emerging economies.


Keywords: Nigerian Banking, Recapitalization, Minimum Paid-Up Capital, Capital Adequacy Ratio, Liquidity Ratio, Basel III, Operational Efficiency, Cost-To-Income, Return on Assets, Financial Stability.

Download doi https://doi.org/10.70315/uloap.ulbec.2025.0204007