Impact of Liquidity Management on the Profitability Selected Nigerian Deposit Money Banks (NDMBs)

Abstract

This study examines the impact of liquidity management on the profitability of Nigerian deposit money banks. The research leverages historical financial statements, industry reports, and macroeconomic data to analyze the relationship between liquidity management practices and profitability indicators such as ROA, Liquidity, Capital adequacy , Assets Quality,  Bank Size  Management, Quality, Management. The study adopted expose facto research design with secondary data sourced from audited financial reports of sampled banks over a 16 years period 2006-2021. Seven (7) Nigerian Deposit Money Banks (NDMBs) constitute the sample using purposive sampling technique. Panel regression analysis techniques were used to test for the relationship between of liquidity management and the profitability of Nigerian deposit money banks. Findings indicate a significant positive relationship between effective liquidity management and enhanced profitability, suggesting that banks with robust liquidity strategies tend to achieve better financial performance.  Findings from the result of granger causality showed that the p value is 0.0930 and the F statistic is 2.8532, both of which are greater than the significance level of 0.05. This indicates that liquidity is not the primary driver of profitability for Nigeria commercial banks. indicate a significant positive relationship between effective liquidity management and enhanced profitability, suggesting that banks with robust liquidity strategies tend to achieve better financial performance. According to the results of the summary statistics, the average return on assets (ROA) for commercial banks is 1.65%, or 0.01654. The result indicates that the average liquidity is 0.40795, which indicate that the average liquidity of the commercial banks is 40.79%. The results further show that bank size had an average value of 7.46751 while management quality had an average value of 2.18043 respectively. Since every value is less than the suggested value of two, the kurtosis and skewness values show that the date is normally distributed. Coefficients, using the observations 1 - 175 5% critical value (two-tailed) = 0.1484The study highlights the critical role of maintaining optimal liquidity levels to support financial stability and profitability. These insights provide valuable implications for banking sector policymakers and financial managers in Nigeria, emphasizing the need for strategic liquidity management to drive sustainable profit growth.