Liquidity Problems In Nigeria Commercial Banks

Liquidity Problems In Nigeria Commercial Banks

Abstract

This design is a veritably pivotal study for the Nigerian marketable banks. The study was motivated by the necessary to establish a way in which liquidity problems in Nigerian marketable banks. Shall be dived . Also it’s a known fact that this work dwelt much on the effect of liquidity problems in Nigerian marketable banks with reference to the effectiveness of government programs and to the bank profit.

To break the exploration problems only the secondary data were collected in this study. The principle sources of secondary data were from textbook books, review etc. they were also collected from both published and unpublished material from the following places, National library Enugu, institute of operation and technology Enugu. Grounded on the findings it was set up that redundant liquidity indicate a rise in the plutocrat on rotation and this tread have been stressed to latterly attract inflationary pressure on the frugality. The conclusion of this study is that marketable banks should keep some of their means equal to a certain chance of their deposit in liquid form. So as to avoid liquidity problems in marketable banks.

Chapter One

Preface

There was a time when trade by trade was the order of the day, come to suppose of that, there was nothing like plutocrat rather than liquidity problems. But when plutocrat( cash) was introduced and there was operations of banks in so numerous places in the country, liquidity problems radiated. still the purpose of this work is to state the effect of liquidity problems in Nigerian marketable banks with reference to the effectiveness of government programs and to the banks profit.

Background Of Study.

According to oxford advanced learners dictionary liquidity means the state of retaining effects of value that can be fluently changed into cash. EBELE OGAMBA in his book BANKING LENDING AND LOAN ADMINISTRATION SECOND EDITION, define liquidity as the ease and speed with which an means can be converted or converted into cash. In other word liquidity of bank simply means “ the ease with which banks means could be converted into cash ”. These means include cash in the banks vault, cash with the central bank and other government securities that haven’t been used as collaterals for loans. But the most liquid of all these means is cash.

The balance of the bank account and cash on hand are of curse impeccably liquid where as debtors are near liquid. Stock isn’t as liquid as debtors because it has to go through the process before it becomes cash. In any business certain arrears have to paid off in veritably unborn and part of the interpretation procedure must be in seeing that payment which are due can infact be match. This is one of the reasons why banks will be liquidity enough. There are so numerous other reasons why a bank should have reasonable liquid means in its means portfolio. These include to be suitable to meet instantly demands for deposit recessions that’s the banks must maintain confidence and also be suitable to use profitable openings that may come out in future.

It should be noted that banks like utmost other business are profit acquainted, for case operating to make profit for their shareholders. The profit could be realized if there’s enough deposits. And the deposits won’t come unless the deposit could be assured of the safety of their deposits, there has to be enough liquidity in the bank. still it’s the fact that action designed to make further profit brings about liquidity in the bank and vice versa. In Nigeria, the conditioning of the marketable banks are regulated by the banking act of 1979 as amended under the control of central bank of Nigeria. The important of these regulations were to maintain trust and confidence in banking systems as well as to achieve a specific profitable ideal.

therefore in the period of mounting redundant liquidity as was the case in the 1970’s, banks were excepted to hold some of their means equal to a certain chance of their deposits in liquid form. This is know as LEGAL RESERVE demand. The explanation for the use of this instruments was to collude out the to stop the inflationary trend in the frugality. The redundant liquidity in the ecomy and also to stop the inflationary trend in the frugality. The redundant liquidity in the banking sector gave rise to inefficiencies in banking operation. Banks staffs were no longer polite to their client, they come arrogant since they had little outlets to invest their plutocrat. Banks still have concoct new system of attracting deposits from guests.