Strategies For Management Bank Liquidity

STRATEGIES FOR MANAGEMENT BANK LIQUIDITY

Abstract

Liquidity management, which refers to a bank’s capacity to choose the right moment for its operations, is the subject of this discussion. This is done by taking a look at its credit portfolio, which is essential to any business’ success. Like any other corporate organization, a commercial bank’s ability to manage its liquidity will determine whether it succeeds or survives.The researcher’s goal is to investigate the methods the First Bank of Nigeria Plc uses to manage its liquidity. The study also intends to provide recommendations for how the bank, based on the research’s findings, might enhance its operations through a carefully thought out and stated liquidity management policy.The researcher experienced some obstacles over the course of this research, including a lack of time, insufficient public interest, and financial limitations.

However, in order for banks to meet their financial obligations to their clients, the researcher advises that management accounting approaches be used to assess the amount of liquidity that each bank holds at any one time.

Chapiter 1

Introduction

1.1 History Of The Study

Banks are no exception to the general rule that all economic agents require liquidity. Demand deposits make up a sizable share of bank liabilities and a sizable portion of the country’s money supply. Therefore, each bank must hold a sizable portion of its assets in cash or in assets that may be swiftly turned into cash. Demand deposits account for a sizable amount of a bank’s liabilities, thus they constantly work to avoid a push on their liquid position. Therefore, a bank’s banker is directed by what is known as the liquidity ratio while dealing with rare loan demands. The ratio of loans to deposits and regulatory requirements must be determined by the banker. The banker must make sure that it consistently complies with the liquidity standards of the Nigerian central bank. The banks will take into account the loans to deposit liabilities ratio. Bankers are less likely to lend money and make investments when the ratio of loan to deposit liabilities increases to a reasonably high level.

Commercial banks use a variety of tactics to maintain sufficient liquidity, including:

1. Limiting lending to short-term commercial needs.

2. Maintaining liquid assets, such as cash, money on call, and discounted debts.

3. They have deposits at the government’s main bank.

The combination of income liquid is very important for Nigerian commercial bank managements. This is due to the fact that a commercial bank’s principal goal is to maximize profits; therefore, the banker must uphold confidence, and to do so, he must keep a sufficient level of liquidity in high-value assets.

Because of this, the researcher wants to look at the idea of the liquidity management tactics used by First Bank of Nigeria Plc.

1.2 Statement of the problem:

How to assess a bank’s liquidity holdings at a given moment in time in order to meet its different financial obligations to its borrowing clients is the main challenge inherent in techniques for managing bank liquidity in this study effort.

There is no question that any bank must implement measures to ensure adequate liquidity in order to consistently satisfy the varied client demands if it is to survive and, as a result, maintain the public’s faith and confidence in its banking operations. A bank runs the danger of risking its existence by losing the confidence of its many customers and the general public in its banking management if it fails to keep sufficient liquid assets.

A precise prediction of cash requirements as well as the anticipated level of liquid assets and cash receipts over a specific time period are necessary to calculate the amount of liquidity that a bank needs at a given point in time.

Furthermore, it’s significant to remember that the Nigerian central bank (CBN) has implemented various steps to ensure that banks may maintain a 25% liquidity ratio and a 5% cash reserve ratio in order to maintain enough liquidity. In addition, the CBN rigorously controls the operations of commercial banks by the banking act of 1969 and the current bank and other financial institutions decree from 1991.

The regulatory authorities of our financial system have attempted a number of different measures to solve this issue, all of which have been unsuccessful, including the aforementioned hold attempts.

1.3.1 Purpose Of The Study

The following goals are the focus of this study:

1. Learn which elements banks give significant weight when determining their liquidity requirements.

2. Assess the success of the bank liquidity management approach that has been used throughout time.

3. Determine the banks’ needs for liquidity management.

4. Identify the issues that the bank’s liquidity management plan faces.

5. Determine the methods and procedures by which these issues can be resolved.

1.4 The Study’s Significance

This study is being done to find out how First Bank of Nigeria Plc has managed its liquidity over the years in an adequate manner.

Given that it counts toward the Higher National Diploma in Accountancy Department of the Institute of Management and Technology Enugu, the research project will be of enormous importance.

Researchers working in the field, academics, and others working in the banking business will all benefit from the discoveries.

Finally, the findings will be put to use by the government, the Central Bank of Nigeria, and then serve as a way for commercial banks to comprehend the standards to be used in choosing the level of liquidity to maintain at any given time in order to meet their corporate objectives.

1.5 Hypothesis Of The Research

The following hypothesis has been developed to further this research and will be used in the analysis of the study.

1. First Bank of Nigeria Plc thought it was important to create policies for managing liquidity.

2. Low liquidity has no effects on the bank’s overall performance.