Liquidity Management and Deposit Money Banks’ Performance in Nigeria

Abstract

The issue of liquidity and profitability management is a paramount one in the banking industry. The problem becomes pronounced when the commercial banks try to maximize their profit at the expense of liquidity. This causes technical and financial hardship in bank management and performance. This study was carried out on four deposit money banks in Nigeria between 2007 and 2016, using Pearson correlation coefficient technique. The empirical results revealed that there is a statistically significant relationship between banks' liquidity, return on asset and return on equity. However, the relationship is not all that statistically significant when return on asset was used as proxy for profitability. It was suggested that the banks should evaluate and redesign their liquidity management strategy so that it will optimize returns to shareholders equity and also optimize the use of the assets. The study showed that good management and control of factors influencing the liquidity of commercials banks in the country could improve the financial performance of banks.