Title: Detecting Bank Insolvency In Nigeria: What Can We Look Out For?
Authors: EHIEDU, V.C and OMONODE, A.
Volume: 9
Issue: 3
Pages: 376-384
Publication Date: 2025/03/28
Abstract:
This study examined the determinants of banks' insolvency in Nigeria. In this study, the researcher aimed at assessing how hank-specific variables such capital adequacy, assets quality, liquidity coverage, size and profitability; and macroeconomic variables such as interest rate and inflation rate, influence the survival of banks in Nigeria. To achieve this objective, emphases were laid on quoted DMBs, thereby defining the sample of the study which consist 10 DMBs in Nigeria selected by the researcher with regards to period of operation which is from 2011 to 2020. Secondary data were collected form the financial reports of the selected DMBs and used to draw averages over the study period of 10 years spanning 2011 to 2020. Data collected for the purpose of this study were analyzed using the OLS regression estimation technique. First, diagnostic tests were obtained to provide assurance for the data set and the model used using the Breusch-Godfreyfor serial correlation, ADF test for unit root, and the model summary which were acceptable. Findings farm this study revealed that t bank-specific variables such as capital adequacy, asset quality, liquidity coverage, size and profitability are core determinants of the survival or otherwise of DMBs in Nigeria, while macroeconomic factors such as interest rate and inflation rate are also capable of altering chances of survival for DMBs in Nigeria when they have to respond to economic shocks brought about by the instability or unfavourable dispositions of those macroeconomic variables. Given these findings, it was recommended that the CBN and other core regulators of DMBs in Nigeria should intensify their regulatory measures in areas pertaining to the capital adequacy, asset quality, liquidity and profitability of DMBs in Nigeria.