Liquidity Management and Financial performance of Deposit Money Banks in Nigeria

A case study of Union Bank PLC

Abstract

This research work investigates the effect of liquidity management on financial performance of deposit money banks in Nigeria. Utilizing secondary data and an ex post facto approach, the study investigates the relationship between liquidity indicators and key profitability metrics. Findings indicate that while liquidity management does not significantly influence profitability and return on assets, it does exhibit a notable impact on Union Bank Plc’s return on equity. The study concludes that maintaining adequate liquidity is crucial for banking stability, but its effect on shareholder returns is a more nuanced consideration. To optimize return on equity while ensuring sufficient liquidity, the study recommends several strategies for commercial banks in Nigeria. These include: enhancing operational efficiency, driving innovation, adopting customer-centric approaches, implementing dynamic risk management frameworks, and tailoring lending practices to better serve customer needs.