BANKS LIQUIDITY RATIO AND RETURN ON EQUITY OF NIGERIA DEPOSIT MONEY BANK IN NIGERIA

Abstract

This study investigated banks liquidity ratio and return on equity of Nigeria deposit money bank in Nigeria in which banks liquidity ratio and return on equity of Nigeria deposit money bank and effect of acid-test-ratio on banks financial leverage were examined. The study population of the study comprised Nigeria deposit money banks listed on the floor of Nigeria Stock Exchange as at 2021. Sample of bank selected was Zenith Plc, Guaranty Trust Bank Plc (GTB), First Bank Nigeria Limited, Access Bank Plc, and United Bank for Africa Plc based on global ranking order and the fact that they are listed on Nigeria Stock Exchange. To determine the effect of banks liquidity ratio and return on equity of Nigeria deposit money bank, Panel Ordinary Least Square (OLS) regression model was employed to analyze the data collected for the period of 2006-2020. The findings of this study revealed coefficient of 0.049927 which implies 1% change in current ratio would result to 4% increase change in operating efficiency and p-value of 0.0183 shows that current ratio has statistical significant effect on operational efficiency of the selected banks within the period under study; coefficient of 0.023031 implies 1% increase change in acid test ratio (ATC) would lead to 2% increase change in bank’s financial leverage of the selected DMBs, p-value of 0.01433 shows that acid test ratio has statistical significant effect on financial leverage of the selected banks within the period under study. The study recommends that the study recommends Nigerian banks should strive to maintain optimal liquidity ratio to achieve efficiency in its operations and reduce operational expenses to the barest minimal.   Keywords:  Liquidity Ratio, Return on Equity, Current Ratio, Operational Efficiency, Acid Test Ratio and Financial Leverage.