Bank recapitalization and stock market development in Nigeria

Abstract

This study examined the effect of bank recapitalization on stock market development in Nigeria from 2004 to 2024. Market capitalization was used as a proxy for stock market development, while capital adequacy ratio, liquidity ratio, and total deposits were used as measures of bank recapitalization. The study adopted an ex-post facto research design and utilized secondary data sourced from the Central Bank of Nigeria Statistical Bulletin and the World Bank database for the period of study. Data were analyzed using descriptive statistics and Ordinary Least Squares (OLS) regression. The findings revealed that capital adequacy ratio and liquidity ratio exhibit positive and statistically insignificant effects on market capitalization in Nigeria at the 5% level of significance. However, total deposits (B = 876.31; P = 0.0000) exhibit a positive and statistically significant effect on market capitalization in Nigeria. The study concludes that bank recapitalization significantly influences stock market development in Nigeria, driven mainly by deposit mobilization. It recommends policies that enhance investor confidence, transparency, and efficient utilization of bank resources. These measures are expected to strengthen the transmission of banking-sector recapitalization into sustainable stock market development by improving financial intermediation, expanding investment opportunities, supporting deeper market participation, and strengthening market resilience.