Working capital determinants of post-consolidation profits of banks in Nigeria and implications for corporate policy decisions

Abstract

This paper explores a microeconomic approach to solving a macroeconomic problem of improving profits of banks in Nigeria and sustaining their existence. Regression results show that there exist significant positive and negative relationships between banks’ working capital variables and bank profits, requiring bank managements to improve investments in cash and balances with the Central Bank of Nigeria, short-term borrowing and other liabilities as findings show there exists significant positive relationships between these variables and banks’ profits; and reduce investments in treasury bills, amounts due from other banks, short-term loans and advances, customer deposits, amounts due to other banks, dividend payments and accruals as there exists significant negative relationships between these variables and bank profits to improve banks’ profits, sustain their existence, improving their ability to finance the Nigerian economy, its growth and development.