Effective Liquidity Management and Profitability of Listed Deposit Money Banks in Nigeria

Abstract

This study examined the impact of effective liquidity management on the profitability of listed deposit money banks in Nigeria. The study employed a quantitative approach and an ex-post facto design to obtain data from five (5) listed deposit money banks in Nigeria, comprising Fidelity Bank, Guaranty Trust Bank, United Bank for Africa, Unity Bank, and Access Bank. Data were extracted from the published financial statements and annual reports of the banks, bulletins and quarterly reports of the Central Bank of Nigeria (CBN), publications of the Nigerian Development Insurance Corporation, and CBN’s Economic and Financial Review for a period of five years ranging from 2018 - 2022. Through descriptive statistics, the Karl Pearson correlation, the Granger causality test, and the multiple linear regressions, the finding of the study revealed that banks’ liquidity and asset liquidity have an inverse relationship with return on assets (ROA). Furthermore, the study’s finding suggests that there is no meaningful correlation between Nigeria commercial banks’ capital adequacy and profitability, while management quality and banks’ size have significant relationships with profitability. The study has both theoretical and practical implications, as it contributes to the body of knowledge and can be applied by banks in their policy formulation and decision-making.