ABSTRACT

This work is a revisit on the impact of the liquidity management on the profitability of banks in Nigeria. The work desires to determine the relationship that exists between the net working capital of deposit money banks and their profitability. An attempt was also made to see if the banks meet up with the Liquidity Reserve Requirement (LRR) of 30% by the Central Bank of Nigeria If not, whether the difference is significant or not, and then the penalty for default. The work similarly attempts to see if the marketable securities of banks form a major part of their current assets. In a bid to do this, secondary data (the audited five year —financial statements .of the six banks) were collected. From the analysis carried out using the correlation analysis and the Z test statistic(using a 5% level of significance) which shows that the relationship existing between the working capital of banks and its profitability is not significant, similarly that that marketable securities of banks do not form a major proportion of its current assets and finally that there is a significant difference existing between the Liquidity requirement of the CBN and that of the banks, I therefore recommend that the banks should manage their liquidity properly so as to enhance their profitability, invest excess cash in securities and try to meet up with and not exceed the Liquidity Reserve Requirement of the Central Bank of Nigeria (CBN).