THE IMPACT OF CAPITALIZATION ON THE BANKING INDUSTRY AND THE NIGERIAN ECONOMY (AN EVALUATION)

ABSTRACT
The CBN in its search for a more robust, stronger and stable banking system,
reeled out a 13 point reform agenda in July 6, 2004 direct among other things,
that operators in the banking sub-sector should raise their capital base to N25
billion with full compliance by December 31, 2005. Although the minimum
capitalization segment of the bank consolidation exercise has since been
achieved, In the light of the above, the study aimed at evaluating the impact of
capitalization on the banking industry and the Nigeria economy. However, the
objective of the study include: Examining the extent to which Banking industry
capitalization has boosted the Nigerian economy, whether the capitalization of
banking industry sector enhanced the banks lending ability, How the
capitalization had contributed towards the growth and development of the
Nigerian economy and to proffer recommendations, to ascertain this, banking
industry capitalization was used to correlate with industrial sector Gross domestic
product (GDP).

The study covered a period of Eight years. Being an Expo Factor
research design, Regression Analysis was used to test the hypotheses using the
following variables: Banks lending rates; Banking industry capitalization,
manufacturing sector utilization rates, industrial sector Gross (GDP) of the
economy. The study found that, the capitalization of banking industry had no
significant positive impact on the growth and development in the Nigeria
economy as in a bid to survive in the highly competitive banking industry. On the
other hand, it was found out that, the capitalization enhanced banks lending
ability within the period. However, this was as a result from the test model,
although, the capitalization of banking industry cannot enhanced banks lending, if
capitalization of Banking industry had no significant positive impact on the
growth and development in Nigerian economy.

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