IMPACT OF LIQUIDITY MANAGEMENT STRATEGIES ON FINANCIAL PERFORMANCE OF SELECTED DEPOSIT MONEY BANK IN NIGERIA (2018-2023), A CASE STUDY OF THE TOP FIVE BANKS BY CAPITALIZATION
Abstract
This study examines the impact of liquidity management strategies on the financial performance of selected deposit money banks in Nigeria, covering the period from 2018 to 2023. Liquidity management remains a crucial aspect of banking operations, as it ensures that banks are able to meet their short-term obligations while maintaining profitability.
The study specifically focuses on the top five banks by capitalization in Nigeria and evaluates how key liquidity indicators such as cash ratio, loan-to-deposit ratio, and liquidity ratio influence financial performance, measured by return on assets (ROA) and return on equity (ROE).
Secondary data were sourced from the annual reports of the selected banks, and the data were analyzed using descriptive statistics and regression analysis. The findings reveal that liquidity management has a significant effect on the financial performance of deposit money banks in Nigeria. While adequate liquidity improves stability and customer confidence, excessive liquidity may reduce profitability due to idle funds.
The study concludes that effective liquidity management is essential for achieving a balance between risk and return in the banking sector. It recommends that bank managers adopt optimal liquidity strategies that ensure sufficient cash flow without compromising profitability.
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