This paper provides new evidence on the effects of bank capital requirement in Nigeria. In investigating the impact, we set up a simple model of the banking firm which can detect the impact of capital regulation on banks’ behaviour as well as having possible effects on the economy. In estimation, we use time series data covering the year 1970- 2009. We employed both OLS and vector error correction method of estimations. The results of the two methods were not significantly different. The simulations based on vector autoregressive (VAR) method indicate the importance of growth of economic activity (growth of GDP) as a major determinant on change in deposits and change in loans.