Nigeria’s 2005 Bank Recapitalization: An Evaluation of Effects and Social Consequences

Kanu Clementina, Hamilton O. Isu


This study critically evaluated the 2005 recapitalization of banks in Nigeria in terms of the positive fallouts and the unanticipated consequences. It was necessary to look at the performance of banks, the recapitalization, while at same time evaluating the human resources and other developmental challenges that grew out of the recapitalization effort. This critical evaluation required the formulation of some testable hypotheses to confirm the merit of the recapitalization or  the absence of same. Tests of the differences of means were also applied to determine if there is any significant relationship between the pre and post recapitalization of banks and Nigerians economic growth. The results obtained confirmed that the 2005 recapitalization effort actually improved the performance of banks and also positively impacted the economy as a whole. The second hypothesis which tried to prove that there is no significant relationship in the pre and post performance of banks after the recapitalization. Our results tend affirm that the  standard of living of the population were negatively affected mostly because of number of banks staff  who had to be sacrificed and    thrown into unemployment to achieve, what some banks experts in the system call “ paper profits”. The extended family system practiced in the country means that the negative consequences of the recapitalization was far reaching than expected, with the result that most families are still licking their “wounds” occasioned by the 2005 recapitalization. Banks recapitalization is not adequate to strengthen and enhance the banking system to face the global challenges. The implication of this study is that government should formulate policies that aim at contribute to the growth of economy and improving standard of living.

Keywords: Banks recapitalization, banks performance, economy, employment, standard of living.

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