Original Research Article | OPEN ACCESS

Central Bank of Nigeria Prudential Guideline and the Financial Performance of Deposit Money Banks in Nigeria

For correspondence:-    

Received: April 29 2022        Accepted: June 23 2022        Published: 13 August 2022

Citation: Central Bank of Nigeria Prudential Guideline and the Financial Performance of Deposit Money Banks in Nigeria. Account Tax Rev 2007; 6(2):47-71 doi:

© 2007 The authors.
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Abstract

The study investigates the impact of Central Bank of Nigeria Prudential Guidelines and the Financial Performance of Listed Deposit Money Banks in Nigeria for the period 2008-2019. The proxies for Prudential Guidelines are Capital Adequacy Regulation (CAR), Liquidity Regulation (LR), and Credit Risk Regulation (CRR) while for Financial Performance are Return on Asset (ROA) and Return on Equity (ROE) to identify the gaps that underpin the problem under investigation. Secondary data were sourced from the Nigeria Stock Exchange (NSE) factbook for the filter sample of Listed Deposit Money Banks (DMBs) that met some criteria. The study employed multiple regression techniques in analyzing the data that were gathered using Ordinary Least Square (OLS) with Eviews-10. The study revealed that CAR has a negative but insignificant effect on ROA but positively and significantly correlated with the ROE while a negative relationship of LR is 12wsignificant on ROA but insignificant on the ROE, However, a negative relationship of CRR is significant on ROA but insignificant on the ROE of DMBs in Nigeria. The study recommends that the minimum capital requirement of DMBs in Nigeria should be reviewed regularly to ensure it remains at an optimal level, adjust their credit policies to reduce impaired loans and maintain a minimum liquidity requirement of 30%.

Keywords: Prudential guidelines, financial performance, deposit money bank, capital adequacy regulation, liquidity regulation, and credit risk regulation