Thesis Abstract

The recapitalization policy introduced by the Central Bank of Nigeria (CBN) has had a significant impact on the country's commercial banks. With a target of N25 billion minimum capital requirement, the policy aimed to strengthen the banking sector, enhance financial stability, and improve the overall performance of commercial banks. This research project delves into the specific impacts of the recapitalization exercise on commercial banks in Nigeria. The study employs a mixed-method approach, combining quantitative analysis of financial data and qualitative assessments through interviews with key stakeholders in the banking industry. The findings reveal that the recapitalization policy has led to a consolidation of the banking sector, with smaller banks merging or being acquired by larger institutions to meet the new capital requirements. This consolidation has resulted in a more resilient and competitive banking industry, with stronger institutions better equipped to withstand financial shocks. Furthermore, the recapitalization exercise has improved the overall risk management practices of commercial banks in Nigeria. As banks increase their capital base, they are better able to mitigate risks, comply with regulatory requirements, and enhance their lending capacity. This has had a positive impact on the economy, as banks are now more willing to extend credit to individuals and businesses, stimulating economic growth and development. Moreover, the recapitalization policy has enhanced the governance and transparency standards within commercial banks. With increased capital requirements, banks have had to improve their corporate governance structures, risk management frameworks, and financial reporting practices. This has not only increased investor confidence in the banking sector but has also fostered greater accountability and transparency in bank operations. Despite these positive outcomes, the recapitalization exercise has posed challenges for some commercial banks, particularly smaller institutions that struggled to meet the new capital requirements. These banks faced difficulties in raising additional capital, attracting investors, or finding suitable merger partners. As a result, some banks were forced to downsize, restructure, or exit the market altogether. In conclusion, the recapitalization policy implemented by the Central Bank of Nigeria has had a profound impact on the country's commercial banks. While the policy has led to a more robust and resilient banking sector, challenges remain for smaller institutions. Moving forward, it will be essential for banks to continue adapting to the new regulatory environment, enhancing their risk management practices, and exploring innovative strategies to remain competitive in the evolving financial landscape.

Thesis Overview

INTRODUCTION

Central bank of Nigeria is the apex financial institution in Nigeria charged with the responsibility of maintaining fiscal and monetary. Stability in the economy. The CBN has its headquarters in Abuja (F.C.T) with some zonal offices in Lagos, Kaduna, Enugu and Ibadan. It is located in Enugu zone at Opara Avenue. In this study, the researcher’s mind it to know the impacts of the B25billion re-capitalization by the CBN on the commercial banks in Enugu state off Nigeria, also banks nation-wide. The researcher wants to know the problems that has caused this new directives also, assume the ways the commercial banks can take-up to meet up with the new directives. The researcher also, wants to know if this new directives by the CBN will help improve the banking and Nigerian economy.

1.1 BACKGROUND TO TH STUDY

The central bank of Nigeria was established in 1958 under the CBN act of 1958 which was repealed thereby reenacting the CBN act of 191 (decree No 24). The CBN owes its existence to the act and it was set up with certain cardinal objectives in mind, e.g (i) to issue legal tender currency in Nigeria.

(ii) to promote monetary stability and a sound financial system in Nigeria etc.

regulations often times take the forms of either rules or directive from the central bank and that is why it has been given the power to:

(a) From time to time, issue directives by circulars requiring each banks to maintain at all times in the form of cash reserves with the bank at its office a sum equal to a prescribed ratio of the bank deposit liabilities, etc section 39 (i)..On the recommendation from the president of the deferral republic, determine what shall be the minimum paid up share capital of each category of banks. Section 9 (1). It has a management team headed by the governor of the bank, deputy governors and directors of the diverse sectors. The governor is an sever-able to the board of directors for its acts and decisions.

1.2 STATEMENT OF THE PROBLEMS

In this section, the researcher focused on the impacts of the N25 billion re-capitalization (new directive) by the central bank of Nigeria (CBN) on the commercial banks in Enugu metropolis and nation-wide. The re-capitalization is viable of yielding some positive reactions or effects on the commercial banks which are as follows:

1. Globalization

2. Merger & Acquisition and consolidation.

3. Increased professional.

4. Stable economy.

According to CBN governor, Prof. Charles Soludo, We affirms that the re-capitalization is a more to strengthen the capital base and introduce multi functional face into the industry. January 4, 2005: This Day News.

1.3 OBJECTIVES OF THE STUDY

The fundamental objectives that prompted the researcher to going into this topic are as follows:

a. To know the reason why the central bank of Nigeria (CBN) came up with such directive (N25 billion re-capitalization).

b. To find out how the commercial banks in Enugu state and nation-wide will raise or meet up with the new directives.

c. To find out the impacts of the new directives on commercial banks.

d. The re-capitalization, will it help Enugu state and the Nigerian economy?

1.4 SIGNIFICANCE OF THE STUDY

The significance of this study is to achieve a great success in contributing the little the researcher can, if not a great deal in expressing the impacts of the new directive (N25 billion re-capitalization) by the central bank of Nigeria on the commercial banks which will bring about an immense knowledge and enlightenments with particular reference to the banks in Enugu state. Hopefully thought, this research work will ultimately broaden the scope of the staffs and management of commercial banks in Enugu state. Also, bring about more noticeable contribution and enhancement to both headquarters and other branches nation-wide to know the benefits and impacts. Conclusively, though the researcher limited the study to Enugu state and banks, the result of the findings will be of great benevolence to all commercial banks in Nigeria likewise, students conducting similar research work on the same topic or related ones.

1.5 LIMITATION OF THE STUDY

In this study, limitation was not really necessary for the researcher because majority, the commercials banks in Enugu state are all branches whose headquarters are in Lagos state and Abuja (FCT) and this study is based on the entire commercial banks in the nation, so the researcher had a universal study through reading of newspapers, magazines (related), symposia from the library (literature search). Moreover, through CBN website to complement the study.

1.6 DEFINITION OF TERMS

IMPACTS: This is the reaction or the drive of the policy on the financial transactions in the diverse levels of banks operating in the nation.

RE-CAPITALIZATION: This is a policy majority by the central bank of Nigeria (CBN) which creates a gradual change in the nation.

It is also the slight differences in bank’s capital base either higher or lower depending on the policy of the CBN.