Analysis of the Relationship Between Bank Recapitalisation and Financial Performance of Deposit Money Banks in Nigeria

Bank recapitalisation policies have been a recurring instrument of financial sector reform in Nigeria, and their impact on the financial performance of deposit money banks warrants empirical examination at the undergraduate level. This study analyses the relationship between the 2005 and 2019 recapitalisation exercises and the financial performance of selected deposit money banks in Nigeria, proxied by return on assets and net interest margin. A longitudinal descriptive design was adopted using secondary data extracted from the annual reports of eight deposit money banks listed on the Nigerian Exchange Group for the period 2000 to 2023. Pre-recapitalisation and post-recapitalisation performance data were compared using paired sample t-tests. Results showed a statistically significant improvement in return on assets in the five years following the 2005 recapitalisation exercise (mean difference = 1.23%, p < 0.05), though the improvement was more modest following the 2019 exercise (mean difference = 0.48%, p > 0.05) amid macroeconomic headwinds. Net interest margin declined in both post-recapitalisation periods, suggesting margin compression from increased competition. The study concludes that while recapitalisation improves asset utilisation efficiency in the short term, its long-term performance impact depends heavily on accompanying monetary policy conditions. The findings inform ongoing discourse on the Central Bank of Nigeria's current recapitalisation agenda announced in 2023.

Keywords: bank recapitalisation, financial performance, return on assets, deposit money banks, Nigeria