Liquidity Management And Banks’ Profitability In Nigeria (1989-2013): An Empirical Analysis

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Jackson Emeka, I. J., & Werigbelegha, A. P. (2016). Liquidity Management And Banks’ Profitability In Nigeria (1989-2013): An Empirical Analysis. Journal of Business Management and Economics, 4(7), 01–05. https://doi.org/10.15520/jbme.2016.vol4.iss7.205.pp01-05
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Abstract

The study examined empirically the relationship between liquidity management and banks’ profitability in Nigeria using time series data spanning (1989-2013). Hypotheses formulated were tested using ordinary least square (OLS) econometrics method. The study reveals that aggregate bank deposit has a positive significant effect with return on asset of banks’ in Nigeria. The study also indicates a positive significant relationship with broad money supply and return on assets of banks’ in Nigeria. The coefficient of determination indicates that about 62% of the variations in banks’ profitability in Nigeria can be explained by changes in liquidity management variables (broad money supply and aggregate bank deposit). Thus, the study recommends that the monetary authority should implement policies that will increase the flow of funds to improves the capacity of banks to extend credit to the economy. Banks should not solely concentrate on the profit maximization concept but should also adopt measures that will ensure effective liquidity management which will help to minimize or avoid cases of excessive liquidity. Banks should schedule the maturity periods of their secondary reserve assets so as to correspond with the period in which the funds will be needed.

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