Bank-specific performance indicators, macroeconomic variables and capital adequacy of Nigerian banking industry

Abstract

This paper examined bank-specific performance indicators and macroeconomic factors affecting the short-term financing obligation of Nigerian banks from 2010 to 2019. The data for the study are sourced annually from the financial statements of the selected Deposit Money Banks and the Central Bank of Nigeria Statistical Bulletin. The panel unit root and co-integration tests are employed to ascertain the sustainability of the bank-specific performance indicators. The models for the industry were cast in a host of panel frameworks such that we estimated the static and dynamic panel models. The study observed that the capital adequacy ratio, which is the short-term financing obligation of Nigerian banks was elastic to bank profitability positively. In addition, interbank call rate, bank size, and oil price positively influence the capital adequacy ratio over time, whereas loan-to-deposit ratio, inflation and exchange rate exacerbate the capital adequacy ratio. Consequently, we canvass that Nigerian banks should reduce dividend payouts and increase retained profits as a buffer against exposed risks.