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This section focuses on Nigerian banking studies that utilised bank-specific CAMELS variables to ascertain the performance of Nigerian DMBs. Most of the studies employed some form of multiple regression estimations to ascertain the factors that determine performance.

Onaolapo & Ajala (2013) examined the post-merger performance of the Nigerian banking sector with the intention of determining the effect and extent to which mergers influenced bank performance. Bank performance ratios (ROE, ROA, and NIM) were adopted as dependent variables, while bank specific variables that proxy asset profit, capital structure, operating efficiency, liquidity risk, and credit risk stood in as independent variables. Multiple regression analysis was used to analyse the variables from 15 commercial banks within the period of 2001 – 2010. The results obtained revealed a strong relation between bank performance and merger. Thus, they asserted that the merger of Nigerian banks during the banking consolidation reforms positively influenced bank performance.

Beck, Cull & Jerome (2005) sought to ascertain the effect of privatisation on the performance of Nigerian banks (1990 – 2001). Using an unbalanced panel of 69 banks and based on the empirical regression analysis, which adopted three performance measures (ROE, ROA, and NPL). The results obtained indicated some performance improvements due to privatisation. Elaborately, they found out that banks that were privatised within the 1990 – 2001 performed

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significantly worse than privately owned commercial banks before privatisation, though this gap was effectively reduced by privatisation. However, according to Beck, Cull & Jerome, this slight improvement is notable given the inhospitable macroeconomic and regulatory environment that hindered true financial intermediation during their sample period. In addition, their results also provided evidence that long established banks that predominately relied on retail banking performed significantly more poorly than new wholesale banks that were fixated on fee-based businesses and lending to the government.

Osuagwu (2014) empirically investigated the determinants of bank profitability in relation to bank-specific variables, industry related factors and macroeconomic variables. The dataset consisted of selected banks that hold about 60% of the banking sector’s total assets within the period of 1980 – 2010. The results suggested that bank profitability is to a large extent determined by credit risk and bank specific that relate to the internal organisation of banking institutions. In addition, the study opined that exchange rate is a significant determinant of bank profitability as revealed by its impact on return on equity (ROE) and net interest margin (NIM), although it did not have a significant effect on return on assets (ROA) as a measure of profitability. In conclusion, Osuagwu (2014) submitted that internal organisation and managerial effectiveness are significant to the profitability of banks and as such bank management could effectively rely on policies that improve their balance sheet positions without regard to external influences.

Ugwuanyi (2015) in a post-financial crisis study sought to examine the interaction between the regulation of minimum capital requirements in Nigerian banks and the risk-taking behaviour of bank operators. The study regressed bank-level data of thirteen (13) banks for the sampled period of 2009 – 2013. The results obtained showed that increase in the size and capital levels of banks correspondingly lead to increased bank risk taking appetite. The results also suggested that an increase in credit risk leads to increased loan loss provisions. Conversely, Ugwuanyi opined that improved regulation translates to reduced risk taking appetite.

More so, in a bid to position Nigerian banks to compete globally with international banks, Nigerian banks started adopting IFRS in 2010. To find out if improved financial information quality impacted the performance of Nigerian banks, Hassan (2015) investigated firm attributes from the perspective of structure, monitoring, performance elements and the quality of earnings of listed Nigerian banks in pre and post-adoption periods of IFRS. The results

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revealed that banking institution attributes in the form of leverage, bank size, profitability, liquidity, and bank growth do have significant effects on earnings quality of listed Nigerian banks after the adoption of IFRS. Whereas, the firm’s attributes in the pre-IFRS period showed no significant impact on earnings quality. Hence, the study is of the notion that the adoption of the principles of IFRS should be encouraged to promote effective monitoring of banking institutions.

Babatunde & Alawiye-Adams (2013) used the CAMEL analytical technique to measure Pre- Structural Adjustment Program (SAP) and Post-Structural Adjustment Program (SAP) performance of Nigerian banks (1971 – 2005). The panel data model they used adopted Earnings per Share (EPS), Return on Capital Employed (ROCE) and Return on Equity (ROE) as proxies for bank performance (dependent variables), while interest rate, real financial savings and exchange rates were adopted as proxies for financial sector liberalization (independent variables). Additionally, Babatunde & Alawiye-Adams conducted various diagnostic tests to evaluate the regression models (Breuch-Godfrey Serial Correlation Lagrange Multiplier test, Ramsey Reset Test of specification error, and the cumulative sum tests of parametric stability). The results, especially for the proxies of EPS and ROE, revealed that the effect of financial sector liberalisation on bank performance was not significant enough to transform the nations’ economy to the desired level. In sum, the results indicated that Nigerian banks were better off in the Pre-SAP era. As such, Babatunde & Alawiye- Adams most importantly suggested that a precondition for an efficient banking sector in a liberalised financial sector is a stable macroeconomic environment.

In a bid to provide empirical evidence on the effect of credit risk management and capital adequacy on the financial performance of Nigerian banks, Ogboi & Unuafe (2013) employed a fixed effect panel data technique on data from six Nigerian banks for the period of 2004 – 2009. The regression model adopted estimated the relationship between loan loss provisions (LLP), loans and advances (LA), non-performing loans (NPL), capital adequacy (CA) and return on assets (ROA). And the results obtained revealed that sound credit management and capital adequacy have positive effects on the financial performance of Nigerian banks aside loans and advances (LA), which displayed a negative effect on the profitability of banks within the study review period. In essence, Ogboi & Unuafe (2013) opined that effective credit risk management and capital adequacy promote improved bank performance and credit risk is a key predictor of bank performance. In addition, the Ogboi & Unuafe (2013)

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concluded that the increased capital base of Nigerian banks scaled down the effect of the global financial crisis on the Nigerian banking sector.

Adeyeye, Fajembola, Olopete & Adedeji (2012) attempted to predict the probability of bank failure in Nigeria by adopting the principal component analysis and the discriminant score model. The results suggested that differences in asset quality, capital adequacy levels, liquidity and profitability are key distinguishing characteristics between failed and healthy banks. On the contrary, the study opined that management quality, economic quality and staff productivity are not significant predictors of financial distress in Nigerian banks, although they might have some sway in repositioning banks that are facing difficulties.

Ajibo (2015) in an exploratory research expressed that recurrent distress and failures in the Nigerian banking industry have shown that the predominant reliance on recapitalization and credit rating statistics by regulators and investors to determine the soundness of institutions is less than adequate. While not dismissing the relevance of capitalization strategy and credit rating data, Ajibo opined that the future of banking regulation in Nigeria should be risk-based regulation. As such, he suggested that risk-based supervision should be made a priority by regulatory agencies in Nigeria, in addition to the adoption of Base II/III accords that lay emphasis on risk regulation and management.

Conclusively, though the studies above examined different dimensions of bank performance none of them employed variables that covered the entire spectrum of CAMELS to review the impact of both the 2005 and 2009 banking reforms. More so, in line with the previous section of this thesis, the focus of most of the studies was the recapitalisation exercises carried out by Nigerian regulators. Additionally, there was no consensus on the factors that influenced bank performance with different studies presenting diverse views on capital adequacy levels, liquidity, management quality, asset quality, and macroeconomic conditions. In like manner, the literature also opined that Nigerian DMBs that depended on government patronage and corporate customers outperformed DMBs that relied on retail and small customers, however recent reforms sought to reduce the reliance of DMBs on government funds. To that end, this study evaluates the performance of Nigerian DMBs in relation to the elements of the last two Nigerian banking reforms. In conjunction to relying on the CAMELS framework to ascertain the determinants of bank performance, this study is different from all other Nigerian banking studies because it also reviews the impact of the global financial crisis. Therefore, this study contributes extensively to banking literature in emerging economies.

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