CHAPTER ONE
INTRODUCTION
Liquidity is the word that bankers used to describe its ability to satisfy the assets for cashing exchange for deposits. Liquidity, debt and profitability position are the three parameters that are used in determining a firms strength and weakness. The ability to turn assets quickly into cash is known as liquidity. The assets of the bank must be kept reasonable liquid so as to meet possible demands from depositors and maintain minimum level of liquidity that a bank must maintain, both as regards cash and other liquidity assets, which can be turned into cash easily. Liquid assets are made up of treasury bills, call money, discounted bills, etc.
In additions, a bank is said to be liquid when it is very capable of meeting promptly the demands by its customers of their deposits with the bank. It is noteworthy that one of the unique the characteristic of commercial banks is their ability to maintain liquidity in the face of loans and advances for investment as well as the perceived demand of legal and social responsibility.
This, no doubt requires air maintenance of a balance between assets and liabilities and between liquidity and profitability.
In other words, it is the responsibility of management to prevent liquidity crisis by ensuring maximum liquidity stability at all times.
Liquidity management aims at scoring optimum investment in securities, optimum interest, income and determining the total amount of cash and marketable security the bank would hold on any point in time.
Be that as it may, liquidity management and all its ramifications is geared towards avoiding two main danger points namely, excess investment and under investment in current assets.
In efficient management leads to excess liquidity is one hand and to insolvency on the other hand. Excess liquidity is an indication of under utilization of assets while technical insolvency indicates lack of funds. Both of them spell in healthy business situation. Insolvency leads to loss of confidence, goodwill and profitability.
If one should ask do Nigerian commercial banks manage their liquidity efficiently and wisely?
Simply put, this question relates to weather or not Nigerian commercial banks are using the right procedures and strategies in managing their liquidity, thereby ensuring efficiency in the entire organization.
SIGNIFICANCE OF STUDY
This research is of particular relevance to the monetary and fiscal policy department of the central Bank of Nigeria. It should enable banks to how to insert their liquid assets in other to maximize profits. It will also enable banks to be able to meet the statutory requirement of the central bank and meet the social responsibilities of the public as well.
It will serve as a responsible managerial tool and it will also be a secondary data to whoever may wish to carryout further research under-utilization also is an undesirable alternative as it erodes profitability. Efficient liquidity management is therefore the only solution to the above problems as it is instrumental to solvency, goodwill and profitability. Hence, this study is geared towards finding how banks management their liquidity position as well as examining the practical problems of bank liquidity.
STATEMENT OF PROBLEM
Strictly, this study/project is liquidity management in commercial banks (A case study of first bank Nigeria Plc in Ozoro). The principle problem being investigated is to determine:
How liquid commercial banks have been and the extent to which they give out loans and advance to their customers.
How best commercial banks can access their customers to guide them against the risk of default in loan repayment.
The extent of goodwill enjoyed by banks among their customer.
How profitable banks have been over the years.
