Evaluation of Nigerian Deposit Money Banks’ Soundness: Bankometer Model

Abstract

The study examined the soundness of the Nigerian deposit money banks in view of stakeholders’ increasing dependence on it as a catalyst for achieving individual and corporate prosperity (wealth, access to funding, improved standard of living, etc.).  The study examined 13 banks over a period of 10 years (2013 - 2022) using both ordinarily least square (OLS) and the IMF’s bankometer model for its analysis. The study observed that the IMF’s bankometer model variables exert significant influence on the soundness of the banks and therefore the model was found appropriate to evaluate banks to determine their state of health. Secondly, the study observed 92.30% of the Nigerian banks examined between 2013 and 2022 had solvency-score (s-score) above IMF’s model soundness minimum threshold of 70%. This implies that all the banks were healthy with the exception of one bank that had a negative s-score indicating a serious state of distress. The foreign affiliated banks were however found to be healthier than the 1st tier banks while three of the the 2nd tier banks had s-score higher than one of the 1st tier banks. The regulators should be proactive in their monitoring activities, rather than depending only on the historical performance review of the banks.  Furthermore, the regulators should devise mechanisms to forecast future trends of each of the banks and for each of the measurement metrics to enable them take precautionary actions that would ensure financial stability and protect the interest of all the stakeholders.