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LIQUIDITY MANAGEMENT IN BANKS: A STUDY OF SELECTED COMMERCIAL BANKS IN NIGERIA (2000-2009)
ABSTRACT
This study sought to examine the challenges of Liquidity Management in Nigeria’s Commercial banks. The study identified some of the notorious factors responsible for most banks’ liquidity problems such as high ratio of Non-performing loans (NPL), excessive risks concentration, fluctuations in statutory Reserve requirements; Assets mismatch in portfolio selection, and Poor Corporate Governance. In order to tackle the magnitude of the problems, the researcher limited the scope of the study to ten year period (2000-2009) in First Bank, Access Bank and United bank for Africa PLC and established three specific objectives and related research questions to guide the study. The secondary data generated from the Financial Statements Reports and Accounts of the selected banks as well as the Central Bank of Nigeria (CBN) reports for the period was used to test and analyze the three hypotheses, based on the stated objectives and the related research questions, using a Parametric statistical sample paired t- test model and Pearson’s Correlation coefficient as the statistical tools. Based on the research findings, it was recommended among others that banks should strengthen their institutional capacity, exercise prudence in credit administration and avoid excessive risk exposure.CBN should also re-appraise the existing corporate governance code necessary and also embrace more pro-active mechanisms in the discharge of their oversight functions for sustainable banking sector liquidity, public confidence, safety and professionalism in banking practice.
TABLE OF CONTENTS
Title Page i
Approval Page ii
Certification Page iii
Dedication iv
Acknowledgements v
Abstract vi
List of Tables vii
CHAPTER ONE: INTRODUCTION
1.1 Background of the Study 1
1.2 Statement of the Problem 4
1.3 Objectives of the Study 6
1.4 Research Questions 7
1.5 Research Hypotheses 7
1.6 Significance of the Study 8
1.7 Limitations of the Study 10
1.8 Definitions of Operational Terms 11
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 Introduction 13
2.2 The Theoretical Framework 13
2.3 Empirical Literature Review 19
2.4 Poor Corporate Governance Issues and Effects on Banking Sector Liquidity 30
2.5 Effects of Poor Banking Supervision and Regulatory Lapses on Banks’ Liquidity Management 37
2.6 The Need for Liquidity Management and Banking Sector Solvency 42
2.7 Potential Sources of Commercial Banks’ Liquidity 45
2.8 Planning and Solving Liquidity Management Problems in Crisis Situations 48
2.9 Measurement and Governance of Liquidity Risk 50
2.10 The Determinants of Liquidity Position 52
2.11 The Liquidity and Profitability Controversy 55
2.12 Corporate Vision and Issues of Liquidity for the Selected Commercial Banks 57
2.13 Synopsis of Commercial Banking Activities in Nigeria 65
CHAPTER THREE: RESEARCH METHODOLGY
3.1 Research Design 68
3.2 Area of the Study 68
3.3 Population Sample and Sample Techniques 69
3.4 Sources of Data Collection 69
3.5 Model Specification 70
3.6 Techniques for Data Analysis 71
3.7 Reliability of Test Instrument 71
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1 Introduction 73
4.2 Data Analysis /Hypothesis Testing 73
4.3 Presentation of Result 74
CHAPTER FIVE:
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Introduction 88
5.2 Summary and Discussion of Findings 88
5.3 Implication of Findings 92
5.4 Conclusion 93
5.5 Recommendations 95
5.6 Contribution of the Study to Future Knowledge 97
5.7 References 10
5.8 Appendix 103
LIST OF TABLES
Tables Pages
4:1 Condensed Financial statement Reports on Non- Performing Loans (Asset Quality) of the selected Banks for the study 82
4:2 Summary of Paired sample t-test Result for Hypothesis One on the Extent Non –Performing Loan Affect Bank’s Liquidity 83
4:3 Condensed Annual Growth Rates of Profitability and Liquidity of Commercial Banks. 84
4:4 Total Deposits and Statutory Reserve Requirements (Liquidity& Cash Ratios) of the selected Nigerian Commercial Banks (2000-2009) 85
4:5 Summary of Paired Sample t-test Result for Hypothesis Two
on the Extent Bank’s Liquidity Position affects its profitability 85
4:6 Summary of Paired sample t –test for Result on the extent Statutory Reserves affect Commercial bank’s Liquidity 86
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