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This study examined the impact of liquidity management on the financial performance of commercial banks in Nigeria. The study uses primary data from 5 commercial banks still in operation between 2005 and 2015: First Bank, Ecobank, Union Bank, Wema Bank and Fidelity Bank.

The study used a survey design and targeted sampling techniques to select 450 of his employees from management, upper management, and lower management. A well-structured questionnaire that was judged valid and reliable was used to collect data from the respondents.

Data obtained from administering questionnaires were analyzed using Pearson’s correlation analysis. Results showed a positive and significant relationship between liquidity ratio and financial performance (r=0.772; p<0.05). There is a positive and significant relationship between the liquidity reserve ratio and financial performance (r=0.896; p<0.05); there is a positive and significant relationship between the loan-to-deposit ratio and financial performance (r=0.772; p <0.05).

The study concludes that there are significant relationships between the liquidity ratio, cash reserve ratio, and loan/deposit ratio of Nigerian commercial banks and their financial performance.

The survey suggested that commercial banks should manage their spending appropriately in a way that enhances their corporate liquidity servicing capabilities. Commercial banks need to focus their spending on productive sectors to reduce the cost of doubt and risk. You need to efficiently manage your cash ratio, cash reserve ratio, and loan ratio to stimulate business growth.

chapter One


1.1 Research background

Often called the “African giant”, Nigeria became an independent country in 1960. The federal government alternated between military and democratically elected rulers until it stabilized in 1999, when Chief Olusegun Obasanjo became president. Nigeria is a country that was colonized by the British prior to its independence and was given the name Nigeria during the pre-independence period. A coined word for the Niger River, the name comes from Flora Shaw.

Before the exchange currency was introduced, the country operated a trading system called the barter system. This system involved the exchange of goods for goods or services for services. This system is an ancient system that our ancestors used to trade with the British lords in the south and the Arabs in the north. Diverse transactions have led to the emergence of different currencies. This he can be divided into two groups. Local/Non-Local Currencies (e.g. Iron, Animals, Salt, Feathers, Pearls, etc.) and Imported/Non-Local Currencies (e.g. Cattle, Manila, Copper, Iron Bars, Gin, Tobacco) (Mint, 2016)

Some of these replacement media were localized and had to be replaced. Some were very cumbersome and lacked the distinctive quality that modern exchanges imply. These restrictions introduced a consistent and acceptable medium of exchange: coins and banknotes.

The Nigerian economy has various factors/components that are essential to its survival. One of the elements necessary for its survival is financial institutions. They have contributed significantly to economic growth and have helped provide an effective way to mobilize economic resources and use them for national development. Commercial banks are part of financial institutions.

These banks began to exist in 1892, the first African Banking His corporation was Ledger Depositor and Co., which he later acquired in 1984 by the Bank of British West African, which later became First.

Bhattacharyya and Sahoo (2011) define central bank liquidity management as the framework, set of policies and tools, and rules that monetary authorities follow in managing systematic liquidity, consistent with monetary policy objectives. claimed to refer to

According to the Central Bank’s 2016/2017 Monetary, Credit, Foreign Trade and Exchange Rate Policy Circular, both commercial and commercial banks can maintain his liquidity ratios of 30, 20 and 10%. It is expected and subject to review. sometimes. Maintaining this ratio contributes to effective liquidity management. This is a key factor that has helped keep banks profitable and save banking institutions and the financial system from failure. Strategic management of banks has helped them maintain their solvency and liquidity so that they can generate sufficient profits and remain financially stable (Agbada and Osuji, 2013). . In order to maintain public confidence in the financial system and enhance the viability of the country’s financial system, banks must hold sufficient amounts of cash and cash-like assets to meet their obligations to pay their citizens. .


Management of liquidity has been an important agenda for every bank for the past few years in Nigeria. Bassey, Tobi, and Ekwere (2016), stated that for the successful survival of banks, policies should be put in place to guard the effective and efficient management of liquidity which enables them to satisfy their financial obligations to customers, build public confidence to maximize the profit for shareholders.

Failure in liquidity management has a negative effect on bank operation and has a long term effect on the economy as a whole. Liquidity management is seen as the major element in measuring the going concern for banks and this is the reason they have come up with the idea to develop policies to improve the liquidity position, yet the problem is unsolved. Edem (2017) states that, the attempts by bank managers to increase return tend to have negative impact on liquidity which might be dangerous to the banks as this can lead to loss of bank’s patronage, goodwill, deterioration of bank’s credit standings and might lead to forced liquidation of bank’s assets on one hand, and maintaining excess liquidity to satisfy customers’ demands might affect the returns on the other hand. Sensarma and Jayadev (2009) found that as banks’ liquidity management skills improved, so did their stock returns. They explained that bank stocks are sensitive to bank management skills, implying a positive relationship between bank cash levels and return on equity.

These statements by both parties contrast each other, and for the purposes of this study, we empirically explore the impact of liquidity management on bank performance, using Nigeria as a case study to examine the implications of either statement. is more realistic.

1.1 Purpose of the survey

The overall objective of this study is to examine the impact of liquidity management on the financial performance of commercial banks in Nigeria. The specific objectives of this research are to:

An assessment of the impact of liquidity ratios on the financial performance of commercial banks in Nigeria. We examine the impact of the cash reserve ratio on the financial performance of commercial banks in Nigeria.
We study the impact of the loan-to-deposit ratio on the financial performance of commercial banks in Nigeria.

Based on the purpose of the investigation, the following hypotheses are made to guide the investigation. Hypotheses are given in null form.

Research Hypothesis
Liquidity ratios do not have a significant impact on the financial performance of commercial banks in Nigeria.
The cash reserve ratio does not have a significant impact on the financial performance of commercial banks in Nigeria.
The loan-to-deposit ratio does not have a significant impact on the financial performance of commercial banks in Nigeria. 1.6 Importance of research

The significance of this study is to obtain relevant and sufficient information to help solve the country’s liquidity problem. Researchers believe that the information obtained will be very useful for the following groups of people:

Governments The study will help governments set appropriate liquidity and liquidity ratios. This will not compromise the operation and survival of commercial banks.

Student/academic field, this research will prove important in this field as it will serve as a future reference for further research.

According to the Central Bank of Nigeria, the study will help assess how effective liquidity management and credit policy guidelines affect profitability.

Dear Investor, this study will help this group of people decide whether to put their resources into a particular economy and whether they will get a good return on that resource. The Treasury Department will use the study to help regulators ensure that guidelines set by central banks are being adequately followed.

1.7 Scope of investigation

The study utilizes his five commercial banks: First Bank, Ecobank, Union Bank, Wema Bank and Fidelity Bank. The information required to conduct this study is taken from the annual accounts for the period 2005-2015 (10 years).

These banks were selected for this study because they have several characteristics unique to them. Banks First Bank, Union Bank, Ecobank, Wema Bank and Fidelity Bank were selected only because they have a long history and were not part of the banks merged by the Central Bank of Nigeria (CBN) in 2011 . 1.8 Definition of terms

It is a term used to describe a company’s ability to convert its assets into cash to repay its liabilities/obligations.


Definition of Terms
Insert bank:
It is a financial institution approved by regulators to mobilize deposits from public institutions, lend funds through loans, and engage in other financial services activities.

cash register:
It is said to be the most liquid asset a company can hold.

Close Cash Assets:
An asset that can be quickly converted into cash. Such assets are rental income, Treasury bills, etc. Financial policy:
This is a macroeconomic policy implemented by central banks to control the money supply, which affects interest rates.

Return to Employed Capital:
It is a financial indicator that measures a company’s profitability and efficiency in deploying capital.

Debt Capital:
This is the ratio used to determine the amount of debt a company uses to fund its assets compared to the value represented by equity.

Debt ratio:
It is the ratio of total long-term and short-term liabilities to total assets.

Interest Coverage:
It is used to determine how easily a company will spend interest on outstanding debt.


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