Empirical Relationship between Capital Base and Profitability of Deposit Money Banks in Nigeria: A Comparative Study

The research work attempts to assess the relationship between capital base and profitability of deposit money banks in Nigeria. The research analysis used published audited accounts of seventeen (17) out of twenty-five (25) banks that emerged from the consolidation exercise and data from the Central Bank of Nigeria (CBN). The research denotes year 2003 to 2005 as the pre-consolidation and 2006 to 2008 as post-consolidation periods for our analysis. Data used for the work were collected from both primary and secondary sources. The two hypotheses formulated were tested using regression analysis and correlation co-efficient (r2). The result of the analysis revealed that there is no significant relationship between pre and post mergers and acquisitions capital base of commercial banks and level of profitability. Based on this finding, it can be concluded that consolidation exercise through mergers and acquisitions has not improved the profitability performances of banks significantly. Finally, the study recommends that to generate more profit, the bank need a good regulatory environment that will enable them to expand their scope of businesses but strictly within the financial service industry; the government should provide necessary infrastructure in order to reduce the cost of doing business to allow banks to make profit.