Determinants of Micro Prudential Banking Stability in Nigeria

This study examined micro-prudential determinants of bank stability in Nigeria from 1992 to2022. Specifically, the study examined the effect of capital adequacy, asset quality, management quality, earnings, and liquidity on the bank stability in Nigeria. Accordingly, five research questions were raised, five null hypotheses were postulated. Data for the study Data that for the study used was sourced from Statistical Bulletin of the CBN Statistical Bulletin (2022), and the World Bank Data Bank (2022). The study adopted the Autoregressive distributed lag model having established that the model exhibited mixed integration. Meanwhile, the Multicollinearity test and Heteroskedasticity test clearly revealed that the model is free from multicollinearity problem and that it is Homoskedastic signaling that the model is fit for prediction. The study found that Capital adequacy though negative but not a major driver of bank stability. Meanwhile, Asset Quality, Management Quality, and Earnings though positive but not a major driver of bank stability.Further, Liquidity is both a positive and major driver of bank stability only on the short run.Based on the findings of this study, the study concluded that bank liquidity is the most significant micro-prudential determinant of banks' financial stability in Nigeria. As such, bank regulatory authorities must ensure that they think beyond increase in capital base since the parameter has anegative effect on its stability and that its effect ion banking stability seems to be insignificant on the long run. Lastly, Regulators must ensure that DMBs are always liquid since this parameterinduces banks' financial stability.