LIQUIDITY MANAGEMENT AND FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

Abstract

The study empirically investigates the impact of liquidity management on financial performance of deposit money bank in Nigeria using time series data from 2011 to 2020. The study analyses the data with the aid of E-view statistical package for descriptive and correlation analysis and STATA 11 after testing for the best estimator from pool OLS, fixed effect and random effect estimator based on Breusch and Pagan LM test, F-test and Hausman test. Deposit to asset ratio has negative but statistically insignificant relationship with returns on assets of DMBs in Nigeria since the P-value of 7.9% is greater than 5% significant level. Cash reserve ratio has positive but statistically insignificant relationship with returns on equity of DMBs in Nigeria since P value of 22.1% is greater than 5% significant level. Loan deposit ratio has negative but statistically insignificant relationship with net interest margin of deposit banks in Nigeria since P value of 91.8% is less than 5% significant level. The study recommends that CBN should strive to improve their regulatory capacity over all DMBs in Nigeria. Special financial court should be established by the government to prosecute serial loan defaulters. Regular training and retraining couple with professional development of staff should be encouraged by the board and management of the bank and CBN. CBN should also set a limit to the level the staff of DMBs can attain without requisite professional and academic qualifications. KEYWORDS: Liquidity Management, Financial Performance, Deposit Money Banks