Abstract

This study examined the effect of working capital on the performance of commercial banks in Nigeria. To undertake this study, the researcher adopted two working capital financial ratios namely loan-to-deposit, ratio and liquidity ratio (measured by current assets/current liabilities) and these ratios served as the independent variable. On the other hand, return on assets served as the proxy for performance and was used as the dependent variable. The data for the study was collected from the Central Bank of Nigeria (CBN) Statistical Bulletin (2016) for the period 1999 to 2016 and the data collected were analyzed using the Ordinary Least Square (OLS) multiple regression technique. Findings showed that loan-to-deposit ratio had a negative and significant effect on return on assets of commercial banks in Nigeria while liquidity ratio had a positive and insignificant effect on return on assets of commercial banks in Nigeria. The study recommended that, among others, that the Central Bank of Nigeria should mandate the commercial banks to go into rural banking in order to shore up liquidity in the banking sector as a way to increase the performance of the commercial banks in Nigeria.