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CAPITAL ADEQUACY AND BANKS’ PROFITABILITY: AN EMPIRICAL EVIDENCE FROM NIGERIA

This paper sets out to examine the effect of capital adequacy on the profitability of deposit-taking banks in Nigeria. It seeks to assess the effect of capital adequacy of both foreign and domestic banks in Nigeria and their profitability. The paper presents primary data collected by questionnaires involving a sample of 518 distributed to staff of banks with a response rate of 76%. Also published financial statements of banks were used from 2006 – 2010. The findings for the primary data analysis revealed a non-significant relationship but the secondary data analysis showed a positive and significant relationship between capital adequacy and profitability of banks. This implies that for deposit-taking banks in Nigeria, capital adequacy plays a key role in the determination of profitability. It was discovered that capitalization and profitability are indicators of bank risk management efficiency and cushion against losses not covered by current earnings.

  • Sokefun Adeyinka
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Olalekan Asikhia

Olalekan Asikhia is the DVC, Research, Innovation and Strategy at Caleb University, Lagos State. He was the past Director of Center for Financial Studies of Chartered Institute of Bankers, and Research Professor at School of Business Leadership, University of South Africa, and won a grant of Poverty/SMEs studies worth R700,000 oer year for 2 years, making a total of R1.4 million. He was also a past Head of the department and acting dean. He had supervised and graduated over ninety-two (92) doctoral candidates and twenty-four (24) master degree candidates. He has over one hundred and thirty-three (133) publications. Olalekan Asikhia is a Fellow of the Nigerian Institute of Marketing. He is a member of the economics and statistics committee of Lagos Chambers of Commerce and Industry. He is married to Busayo Asikhia and blessed with two children.

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