IMPACT OF LIQUIDITY RISKS ON THE FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA
Abstract
This research work is to examine the ‘Impact of liquidity risks on the financial performance of Deposit Money Banks in Nigeria within the period 2010-2023. The study seeks to ascertain the relationship between liquidity risks and Returns on Assets (ROA) of selected Deposit Money Banks in Nigeria and the effect of liquidity risks on Return on Equity (ROE) of selected Deposit Money Banks in. The sample size was 5 randomly selected commercial banks in Nigeria which are: First Bank of Nigeria, United Bank of Africa, Guaranty Trust Bank, Access Bank and Zenith Bank. The researcher made use of secondary sources of data. The data was sourced through texts books, journals and magazines. The data that were gathered was estimated with Ordinary Least Square (OLS). The study concluded that the financial performance of the banks in Nigeria can be improved upon by the establishment of sound and robust liquidity management structure in place to ensure that adequate liquidity is maintained to meet matured and maturing obligations as they fall due. Liquidity management has a negative but statistically insignificant impact on the financial performance of Deposit Money banks in Nigeria when proxied by deposit to asset ratio and return on asset and loan deposit ratio and, return on assets, return on equity and net interest margin. This means the higher the deposit to asset ratio the lower will be the financial performance of DMBs in Nigeria. This result is consistent with previous study of (Kayode, et al, 2015) but inconsistent with the previous study of (Adesugba and Bambale, 2016). The research recommended among others, that CBN should strive to improve their regulatory capacity over all DMBs in Nigeria. If the CBN wish to improve liquidity of DMBs they should proactively control the volume of money in circulation through the use of CRR in order to achieve the macroeconomic objectives of the government and also stabilise the DMBs in Nigeria.
Keywords: Impact, liquidity risks, Return on Assets (ROA), Return on Equity (ROE), financial performance, performance DMBs, Nigeria
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