Impact Of Liquidity Management On The Profitability Of Commercial Banks In Nigeria

ABSTRACT

The study empirically emphasized the impact of liquidity management on commercial banks profitability in Nigeria using time series data from 1996 to 2015. The dataset sourced from Central Bank of Nigeria Statistical Bulletin was analyzed using multiple regression analysis. The results of the analysis revealed that bank cash assets and treasury bills rate has a negative and significant impact on commercial banks profitability (proxied by return on assets). Also, treasury bills rate was found to have a negative and significant impact on commercial banks profitability. On the other hand, cash reserve to asset ratio was positive and insignificant, while liquidity ratio was positive and insignificant. Based on the findings an efficient management of bank liquidity would not only inure to the benefit of banks but also to individuals and business entities and thus the whole economy at large.

TABLE OF CONTENTS

Title ﾿ i

Declaration ﾿ ii

Certification ﾿ iii

Dedication ﾿ iv

Acknowledgments ﾿ v

Table of contents ﾿ vi

List of Tables ﾿ vii

Abstract

CHAPTER ONE

INTRODUCTION ﾿ 1

1.1 ﾿ Background to the Study ﾿ 1

1.2 ﾿ Statement of the Problem ﾿ 4

1.3 ﾿ Objectives of the Study ﾿ 5

1.4 ﾿ Research Questions ﾿ 6

1.5 ﾿ Research Hypotheses ﾿ 6

1.6 ﾿ Significance of the Study ﾿ 7

1.7 ﾿ Scope of the Study ﾿ 8

CHAPTER TWO

REVIEW OF RELATED LITERATURE ﾿ 10

2.1 ﾿ Conceptual Framework ﾿ 10

2.1.1 ﾿ Concept of Liquidity ﾿ 14

2.1.2 ﾿ The Concept of Profitability in Banks ﾿ 15

2.1.3 ﾿ Measurement of Liquidity in Commercial Banking ﾿ 17

2.1.4 ﾿ Relevance of Liquidity and Profitability to Nigerian Banks ﾿ 21

2.2 ﾿ Theoretical Review ﾿ 22

2.2.1 ﾿ Anticipated Income Theory ﾿ 22

2.2.2 ﾿ Shiftability Theory ﾿ 22

2.2.3 ﾿ Liquidity Preference Theory ﾿ 23 

2.2.3 ﾿ Commercial Loan Theory ﾿ 24

2.3 ﾿ Empirical of Related Empirical Literature ﾿ 25

CHAPTER THREE

RESEARCH METHODOLOGY ﾿ 32

3.1 ﾿ Research Design ﾿ 32

3.2 ﾿ Area of the Study ﾿ 32

3.3 ﾿ Data Collection ﾿ 33

3.4 ﾿ Method of Data Analysis ﾿ 33 ﾿

3.4.1 ﾿ Model Specification ﾿ 34

3.5 ﾿ Description of the Variables ﾿ ﾿ 35

3.7 ﾿ Decision rule ﾿ ﾿ 37

CHAPTER FOUR

PRESENTATION OF DATA, ANALYSIS AND DISCUSSIONS

4.1 ﾿ Presentation of Data ﾿ 38

4.2 ﾿ Results, Interpretations and Hypotheses Testing ﾿ 38

4.2.1 ﾿ Descriptive Analysis ﾿ 39 ﾿

4.2.2 ﾿ Regression Analysis ﾿ 40

4.2.3 ﾿ Discussion of Results and Test of Hypotheses ﾿ 41

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 ﾿ Summary of Findings ﾿ 43

5.2 ﾿ Conclusion ﾿ 43

5.3 ﾿ Recommendations ﾿ 44

REFERENCES ﾿ 46

APPENDIX ﾿ Descriptive Statistics & Regression Analysis ﾿ 51