Liquidity management in the nigerian banking sector

Thesis Abstract

Banking business is a very risky business. The operation of banks include; the mobilization of deposit and the extension of credit. A bank can be defined as the instrumental agency through which debt and credit are converted and changed between. Banks also act as intermediaries, they mobilize deposit and pay interest on them and make loans and receive interest thereof. Management of liquidity occupies strategic positions in the management of banks in Nigeria. The purpose of this project work arose from the need to know the problem inherent in the management of liquid assets otherwise known as liquidity management. Primary data were collected through the administration of questionnaires and oral interviews on members of staff of the selected banks. The data captured in the questionnaire, which are on perception of banks liquidity management, were analyzed using percentages which then facilitated inferential statistical analysis using chi-square. The study revealed that there are two types of problems inherent in the management of liquidity. They are the problems of excess liquidity and shortage of liquidity. It also showed that profitability will be optimized only when liquidity is effectively and efficiently managed. Based on these, the study suggested that banks should not solely concentrate on the profit maximization concept but should also adopt measures that will ensure effective liquidity management which will help to minimise or avoid cases of excessive and deficient liquidity as their effects. Also banks should schedule the maturity periods of their secondary reserve assets to correspond to the period in which the funds will be needed.