Asset-Liability Mix and Financial Stability of Deposit Money Banks in Nigeria

Capital adequacy ratio (CAR) is a primary measure of financial resilience among Nigerian deposit money banks. Yet, frequent mismatches between asset and liability maturities continue to hinder compliance with regulatory CAR thresholds. This study explores how the asset-liability mix (ALM) influences CAR among deposit money banks (DMBs) in Nigeria. Using fixed-effects panel regression and the System GMM approach, the analysis covers data from 2012 to 2023 to examine the impact of maturity gaps on capital adequacy. The results show that asset-liability components: net fixed assets, total deposits, long-term funding, and cash and cash equivalent, have positive and significant impacts on CAR, while net loan portfolio shows a negative effect. The study highlights that bank size significantly influences asset-liability management on CAR of DMBs in Nigeria. Overall, the findings highlight the importance of strategic balance sheet structure in sustaining regulatory capital strength. These insights offer practical implications for bank managers, regulators, and policymakers seeking to strengthen financial stability in Nigeria.