IMPACT OF LIQUIDITY MANAGEMENT ON THE PERFORMANCE OF SELECTED COMMERCIAL BANKS IN NIGERIA (2005-2019)

The study investigates the impact of liquidity management on the performance of selected top commercial banks in Nigeria for the period 2005 to 2019. In the course of the study, principal component analysis was computed for the dependent variables (ROA and ROE), for the major liquidity management measures (CRR, LRR, MPR and LDR). The study employed panel multiple regression model (PMREG) as an estimating technique for the study. The panel unit root test confirmed that all the variables are stationary at level and at first difference while the padroni and Kao co-integration test confirms that long run relationship exists between liquidity
management and selected top commercial banks in Nigeria. The empirical findings for the model 1, revealed that cash reserve ratio, exchange rate, inflation rate, lending rate and monetary policy rate has negative impact on return on assets, although cash reserve ratio, and lending rate has significant impact while exchange rate, inflation and monetary policy has insignificant influence on return on assets. On the other hand, the second model affirmed cash reserve ratio, liquidity required ratio, and exchange rate has positive impact on return on equity, although exchange rate has insignificant impact on return equity while cash reserve ratio and liquidity required ratio has significant on return on equity, while the third model shows that liquidity management by the monetary authority has negative and insignificant impact on the performance of the three top banks in Nigeria, that is Ecobank, First
Bank and Zenith Bank. Furthermore, the study recommends that Commercial banks should be given leverage of plugging back funds into investment to boost their profitability while maintaining a level of liquidity ratio.