Benchmarking incidence of distress in the Nigerian banking industry on Altman scale

Abstract

This paper applied the Altman's model in the prediction of distress in the Nigerian banking industry. Three banks (Union bank, Bank PHB and Intercontinental Bank) declared distress during the period of the study were used as case studies. Four years financial statistics prior to distress was used to compute the most discriminating financial ratios that were substituted into the Altman's model. The result of the analysis shows that Altman's model significantly predicted the distress state of each of the bank at 0.001 level. The implication being that Altman's model can be validly applied in the prediction of the health state of banks in Nigeria. The paper recommends for further research on the domestication and adaptation of the model in order to improve its predictive ability. .

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