This study investigates the impact of banking regulation on the financial performance of selected National Microfinance Banks in Nigeria. Specifically, the study examines the effect of Minimum Capital Requirements and Prudential Ratios prescribed by the Central Bank of Nigeria on the financial performance of National Microfinance Banks, measured by Return on Equity. An ex-post facto research design was adopted, relying on secondary data obtained from the annual reports of the seven licensed National Microfinance Banks in Nigeria and Central Bank regulatory publications over a ten-year period (2015–2024). The data were analysed using Multivariate Analysis of Variance (MANOVA) to capture the simultaneous effects of regulatory variables on financial performance indicators. The empirical findings reveal that Minimum Capital Requirements and Prudential Ratios exert a statistically significant influence on the financial performance of National Microfinance Banks in Nigeria. Specifically, higher capital requirements and compliance with prudential standards are associated with improved financial performance, suggesting that regulatory measures contribute positively to institutional stability and profitability. The interaction effect between these regulatory variables further indicates that their combined influence plays a critical role in shaping performance outcomes. Based on these findings, the study recommends that regulators should sustain effective enforcement of capital and prudential regulations while ensuring sufficient flexibility to accommodate the unique operational realities of microfinance banks. Additionally, National Microfinance Banks should strengthen internal capital management and risk-control mechanisms to optimise returns and ensure long-term financial sustainability.
Keywords: Financial Performance, minimum capital requirements, prudential ratios and returns on equity (ROE)
