ABSTRACT
The study of liquidity management in banks with particular reference on Union Bank Plc. Okpara Avenue Branch and Nice Community Bank Amawbia Awka.
Chapter one looked into the liquidity and profitability position in order to find out why banks needs to be move liquid than any other financial institutions as well as business Organization. The aim is to final a lasting solution to in eliminate fund shortages and inability of some banks to provide a required liquid when called upon on emergencies.
A significance number of literature relating to the subjects matter were reviewed and in all they agreed that liquidity management in most banks are as a result of fraud and other financial malpractices, it is also noted that some bad depths are as a result of giving loans without requesting for collateral.
Through in hypothesis test II and table 4:1:4 the data analysis and presentation shows that banks strictly select those that mind their vaults or treasury but it does not stop the funds and other malpractices.
The study recommended that banks should keep liquid in excess to solve the problem of inadequacies and delicacies and to close the gap of scarcity of fuels and such like problem and they should relate to other branches and cash centers when ever there is a signal of low centers when ever there is a signal of low liquid by the head of treasury.
It is also agreed that in spite of interest intent being made by banks that Nise community bank should go into foreign exchange services and other related services like treasury bills to promote them profitability.
Finally the researcher concluded that government should intervene in this case so as to authorize community banks in foreign advances and to put to a stop of regulations of CBN over keeping certain amount to eliminate fuel scarcity and such like problems.
CHAPTER FOUR – RESENTATION AND ANALYSIS OF DATA
CHAPTER FIVE – RESEARCH DISCUSSION, RECOMMENDATION AND CONCLUSION
Reference
Bibliography
Appendices
1.1 BACKGROUND OF STUDY
A bank is set to be liquid when there is sufficient cast and cash transferable assets including investment in securities that are easily realizable at a short notice without loss to the bank, together with the ability to raise fund quickly from other sources to enable it to meet its payment obligations and financial commitment in a timely manner, but in community a bank security investment is not realizable since they appoint securities individually (i.e. not from an organization concern for provision of security) so security is excluded in liquid of community banks. In addition, there should be sufficient liquidity buffer to meet almost all financial emergencies.
Liquidity management of commercial banks is a very vital issue in the banking industry. It is the ability of the bank to manage it liquidity position so that the liquidity and profitability will not suffer. But for this to be effective, liquidity management must contribute to the achievement of the overall co-operate fund management objectives for attaining and maintaining a balance of profitability, solvency and liquidity.
The obligation of maximum liquidity owed by surplus units can only be achieved by holding all ingestible funds as cash since it has maximum profitability, the bank must invest all funds in loan and overdraft which is considered the average fielding and most liquid of all assets of the banks.
Banks plays an important role in the economy particularly in monetary and credit aspects of the economy but face a lot of restrictions. Irrespective of the facts that banks are the most highly and closely regulated of all business, union bank still have to operate within the confines of the law (CBN) and solve problems of liquidity and profitability dilemma in the economy.
Despite all these constants and dual role of liquidity. Profitability and otherwise, there is vertically no work in the liquidity management in Nigeria commercial banks and community banks. Though the regulations of CBN are not affecting community banks much but they still have little work on the liquidity management. In the light of this, the researcher has decided to discuss this topic based on the analysis of data collected; the researcher will suggest some solutions to the problems of liquidity management.
Union bank assets management is a never-ending tug of war. This war is pitched between efficiency liquidity management on one hand and profitability at the other hand. In community banks like Nise community bank some notorious community banks have found little solution on management of assets.
As liquidity and profitability and two inherent goals in commercial banks, banks managers continued experiencing the conflict of trying to provide efficient mechanism of addressing their banks liquid and safety necessary from the nature of their liabilities.
A high proportion of commercial banks liabilities are made up demand deposits (current account deposits, saving deposit, fixed deposits and funds from other sources like loan interest changers, overdraft, treasury bills, treasury certificate travelers cheque, services changes Semites of valuable items of customers changes.
Necessarily, union bank need to keep only liquid asset, earn, it is less risky and less it is likely to field adequate returns. As such the higher the less risky assets the more union bank is exposed to experience a “backrub” or crisis”. At this rate, banks will probably not be able to cover all its cost and also make profit for the owner.
Union bank and Nise community bank as business oriented firms with their share holders interested on profitability should satisfy it shareholders while community banks not only satisfy their share holders also ensure development and establishment of private sections (small scale business). A bank might be temped to forget liquidity and pursue profitability by investing only on high yielding less liquid assets that are profitable at the expense of liquidity which is dangerous. It is always necessary to balance liquidity and profitability in order to have efficient bank management
The ratio or percentage of idle cash balance banks are to gold at a point in time and in what form to hold it is very necessary, that they should bear in mind the importance of satisfactory levels of profit. There are many constraints to banks in achieving of their goals liquidity and profitability such as legal reserved requirement and they should maintain adequate liquidity to meet unforeseen and seasonal loan demand and fluctuations of deposits, cash reserves are also needed to take advantage of unexpected profitability investment opportunities.
In effect, union banks and community banks are constrained and have to walk on a “tight rope”. That is the never – ending tug of war or dilemma policy of commercial banks sometimes inconsistency of monetary policy as administered by the central bank of Nigeria CBN elevates banks problems.
1.2 STATEMENT OF PROBLEMS
Despite some techniques in liquidity management in financial institution, there is no doubt that a lot of ills are base thing financial institutions existence in Nigeria especially in the area of liquidity management and profitability management.
Regulations do not guarantee that they will reserve bank failures and serious banking crises. No matter how effective and thorough the regulation mechanism the problem of liquidity and profitability management may still occur as history has shown it even with high policy and regulation which usually accompany the movement of liquidity and problems of keeping idle cash that yields no income. it is to prevent impact of such problems from threatening the system last resort function on the central bank exist in protect the aggregate deposit of the system and prevent the collapse of single institution from stabilizing the entire financial system. Also problems due exist due to hand care of some policies like high interest rates and rift among flow financial institutions.
1.3 OBJECTIVE OF THE STUDY
The objective of this research is look into the liquidity management of union bank and Nise community bank with more emphasis on commercial banks investment, liquidity and profitability position. The researcher will try to find out why commercial banks and community banks need to be move liquid than any other business organization and financial institution, to fined out what methods techniques banks should employ to solve problems.
It will also look at the effectiveness and management of their portfolio by employing and using various approaches, theories, instruments methods to solve this liquidity / profitability problems.
At the same time critical loot will be their at the assets portfolio management of union bank and Nise community banks with a view of determining if there is a defined relationship between the rate of profitability and liquidity.
Finally I wish to identify, differences and similarities in their banks and community banks options and Nigeria commercial banks are excessively liquid but make high profit at the same time.
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