The Anatomy of Sick Banks in Nigeria: Evidences from Multidiscriminate Analysis Models on Selected Nigerian Commercial Banks

Abstract

This study investigates the banks’ signs and symptoms of sickness and susceptibility to corporate failure using multidiscriminate modeling approach with panel data of 14 commercial banks in Nigeria over the periods 2005 – 2012. The study also employed corporate failure prediction models to generate the parameters used to predict the banks’ susceptibility to corporate failure and determination of weakness and sickness. The results of the business failure models revealed that five (5) out of the fourteen (14) banks were strong with their z-score values ranging from 2.99 to 3.05 which were the minimum bench marks for strong, sound and healthy banks while five (5) out of the fourteen samples banks were on the border line of average performance with their z-score figures reported at 1.88 to 2.04 and four (4) of the banks are already sick and weak and susceptible to failure with z-scores of 1.55 to 1.72 which fall below the cut-offs for average performance as prescribed by Altman. The study suggests that government should examine with all seriousness the genuineness of the claim of N25 billion minimum capital base for the Nigerian banks as a follow up to what banks claimed they had in year 2005.