Liquidity Management Measures and Bank Performance in Nigeria: An Empirical Analysis
Abstract
The paper is on the effectiveness of liquidity management measures on bank performance in Nigeria. The reoccurring liquidity crisis experienced in the industry in time past has raised doubts as per the effectiveness of existing liquidity management measures in enhancing bank performances. Also, dearth of empirical work in this regard all necessitated the need for this paper. Time series data for the research was sourced from the Central Bank of Nigeria Statistical Bulletin boardering on Banks Performing Loans and Advances (PLA), Bank Reserves (RSV), Investment in Government Securities (GOVS), Domestic InterBank Claims (DIBC) and Foreign Claims (FORC). The Augmented Dickey Fuller (ADF) Unit root test, Johansen Co-integration test, Pairwise Granger Causality test, Vector error Correction test and diagnostic tests (Heteroscedasticity, Multicollinarity, Normality and Autocorrelation) of the E-view 7.1 econometrics tools were used for data analysis. The result of the study indicated the existence of causality and long-run relationship between liquidity management measures and bank performances in Nigeria. This was further confirmed by the Vector Error Correction Model that was appropriately signed with a significant t-static. The ordinary least square (OLS) estimation found all the measures to be statistically significant and of positive impact except Foreign Claims (FORC) that was insignificant. Thus, the paper was of the view that policies that encourages existing liquidity management measures should be sustained and non-functional measures reviewed to strengthen their effectiveness.
Keywords: Liquidity Management, Measures, Bank Performance.
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