CAMELS AND BANKS’ PERFORMANCE IN NIGERIA 1990 – 2020

Abstract

The major macroeconomic goal of many nations is to have a sound and efficient banking sector which will in turn lead to a stable and sustainable economy. The adoption and compliance with the CAMELS indices is required to achieve such laudable economic goal. The main objective of this study is to investigate the effect of CAMELS on the performance of Deposit Money Banks in Nigeria and it covers from 1990 to 2018. Ex-post facto research design was adopted in the study and the Ordinary Least Square (OLS) technique was used for the study analysis. This study randomly selected five deposit money banks and secondary data were sourced from their various published accounts as it relates to the dependent variable Return on Assets and the CAMELS indices as the independent variables. Mixed correlation was found from the tests results as only management efficiency maintained positive and significant impact on banks’ performance while other variables varied in their impact on banks’ performance at different periods. The result also showed no autocorrelation, no collinearity and no hetroscadestity hence the model is plausible for analytical purposes. Given these findings, it is concluded that CAMELS variables are good determinants of Banks’ performance in Nigeria. The major recommendation in this study is that banks should fully comply with the prudential guidelines and other policies of the bank regulatory bodies like the CBN and NDIC which entails some of the indices used in this study.