ProjectClue.com WhatsApp or Call Us

projectclue whatsapp icon07030248044

Project Topic:

THE IMPACT OF LIQUIDITY PROBLEM ON THE NIGERIAN BANKING INDUSTRY

Project Information:

 Format: MS WORD ::   Chapters: 1 - 5 ::   Pages: 52 ::   Attributes: Questionnaire, Data Analysis, Abstract  ::   1,849 people found this useful

Project Department:

BANKING FINANCE UNDERGRADUATE PROJECT TOPICS, RESEARCH WORKS AND MATERIALS

Project Body:

CHAPTER ONE

INTRODUCTION:

Liquidity is crucial to the on-going viability of any bank as liquidity can have dramatic and rapid effects on even well capitalized banks.

When a crisis develops in a bank as a result of other problems such as deterioration in asset quality, the time available to the bank to address the problem will be determined by the liquidity therefore, the measurement and management of liquidity are amongst the most activities of banks.

1.4 BACKGROUND OF STUDY.

The term liquidity means the ease with which an asset

can be turned to cash with certainty Orjih John (1996:152).

Liquidity in banks can be defined as the capacity of the bank to meet promptly its current obligations that is its customers demand.

A bank is considered to be liquid when it has sufficient cash and other short term financial instruments like treasure bill, treasury certificate and call money in its portfolio together with the ability to raise funds quickly from other sources to enable it meet its payment obligation and other financial commitments in a timely.

How much liquidity to hold and in what form constantly disturbs bank management. Banks are also required to comply with the cash reserve requirements (CRR) set by the Central Bank of Nigeria (CBN).

During periods of expanding economic activities banks are frequently faced with attractive loan situations, which can only be met if banks maintain adequate liquidity.

In Nigeria, Banking activities are registered strictly by the banking act of 1969 was amended under the control of the central bank of Nigeria. As a result of these regulations the banks required to hold specific assets equal to certain other liability in liquid form. This is known as the cash reserve requirement (CRR), liquidity ratio and stabilization securities issued by the central bank.

STATEMENT OF PROBLEM.

The most profitable activity of a commercial banks is the lending of money by loan or overdraft but every time a bank increases its advances to customers it increases at the same time the amount that are likely to be withdrawn in cash. Most borrowers simply wish to be able to draw cheques up to the amount of their overdraft but some of them may want cash and in general a certain proportion of loans will be taken in cash. This banker is torn between two conflicting motives: On the one hand he would like to expand his loans in order to make more profit and on the other hand, he is anxious to hold sufficient cash so that he can at all times fulfill his obligations to pay cash on demand J.L Hanson (1970:37).

PURPOSE OF THE STUDY.

The impact of liquidity problem:- This is the purpose of this study to look at problems encountered by bank managers responsible for liquidity management.

It will also focus on guidelines set by the CBN and other regulatory body for the development of liquidity management in Nigeria banks.

Finally, the impact of liquidity problems will be looked at on how it affects profitability, loans and advances to customers of commercial banks and the Nigerian economy.

1.4 OBJECTIVES OF THE STUDY.

The objective of this study on the impact of liquidity problem is to find out.

1. If the CBN has enough policies or guidelines put in place to help the banks fight this problem.

2. To find our banks for the correction of this problem.

3. The overall impact of liquidity problems on loans and advances to customers of the commercial banks.

4. To find out the liquidity problems in relation to customers deposit.

5. The profitability of commercial banks in Nigeria.

1.5 RESEARCH QUESITIONS.

1. What is the impact of liquidity problems in the Nigerian banking industry?

By this we main how the effect of excess cash holding by banks in their vault affect their progress and equally how the non-holding of cash affect their transportation too. This effect could be negative in that making banks to give out loans and banks.

2. How important is liquidity management?

Liquidity management is very essential in that liquidity transcends the individual bank, as a liquidity short fall in a single institution can have system-wide repercussions. Consequently, the analysis of liquidity requires bank managements to measure, not only liquidity positions of their banks, on an ongoing basis, like also to examine how finding requirements are likely to evolve under crisis scenarios.

3. WHAT IS THE RELATIONSHIP BETWEEN LIQUIDITY AND PROFITABILITY IN THE NIGERIAN BANKING INDUSTRY?

Both are interwoven in a particularly way in that in providing for liquidity one has to also check out ways of being profitable.

Liquidity is maintained by banks for the primary purpose of meeting depositors demand which will help this banks to have a good standing and reputation with the public. On the other hand banks are set up to make profit and their profitability portion is an index of measuring the performance of the bank. Which will also help them to meet up with their own financial obligations. Orjih John (1996:152-154).

SIGNIFICANCE OF THE STUDY.

The significance of this research work is aimed at getting relevant information and solutions to liquidity problems facing the banking sector in Nigeria.

The researcher hopes it will be of immense benefit to the following sectors.

i. The banking sector in Nigeria especially bank managers involved in liquidity management.

ii. The government sector.

iii. The monetary and fiscal policy department of the central bank of Nigeria.

iv. Finally for countries facing similar problems.

1.8 DEFINITION OF TERMS

LIQUIDITY:– This is the ability of a bank to meet promptly, its current obligations. This simply means the capacity of the bank to meet its customers demand as and when due liquidity problem.

In this case a bank may be suffering from shortage of cash in its vault to meet its current obligations liquidity ratio:

It is the cash requirement held by banks as directed by CBN. It is the ratio above which banks may not raise its loans and advances relative to its liquid assets.

This is cash deposited by the customer to the bank, which can be withdrawn at anytime.

LOANS AND ADVANCES:-

These are by far the largest assets of the commercial banks. The lending system of the commercial banks can be in the form of loans and overdraft facilities. This is one of the major ways profit is made.

CASH:

This is the amount of notes and coins held in the strong room of all the head offices of banks and in other branches to meet customer’s demands for cash withdrawals. Cash reserve does not yield income. It is the most liquid of all the assets.

CALL MONEY:

Money at all is the shortest maturity instrument and it is the next liquid item after cash. It is an arrangement whereby banks borrow money from one another on overnight basis.

TREASURY BILL:

These are short-term instruments issued by the central bank of Nigeria to raise finance for the federal government, its maturity is usually for 91 days.

TREASURY CERTIFICATE:-

These are short-term instruments issued by the government with maturity period of one to two years.

MONETARY POLICY:

Defined by the CBN as the combination of measure designed to regulate the value, supply of money in an economy in consonance with the expected level of economics activity.

FISCAL POLICY:

Fiscal involves the use of government income and expenditure instruments to regulate the economy.

CASH RESERVE REQUIREMENTS;

This is the proportion of banks total deposits liabilities (Demand, Savings and Time Deposit), Certificate of deposit, promissory notes and other items held in cash balance with CBN.

 

Get the complete project »


Instant Share On Social Media:


Can't find what you are looking for?
Call (+234) 07030248044.

OTHER SIMILAR BANKING FINANCE PROJECTS AND MATERIALS

A CRITICAL ANALYSIS OF CAUSES AND PROBLEM OF FINANCIAL DISTRESS IN NIGERIA BANKING SECTOR (A CASE STUDY OF AFEX BANK PLC.)

 Format: MS WORD ::   Chapters: 1 - 5 ::   Pages: 68 ::   Attributes: Questionnaire, Data Analysis,Abstract

CHAPTER ONE INTRODUCTION The importance of capital as a necessity though not sufficient condition for economic growth is recognized in development economy where it is believed that the position of ...Continue reading »

A CRITICAL ANALYSIS OF THE USE OF FINANCIAL REPORT IN ASSESSING BANK PERFORMANCE. (A CASE STUDY UNION BANK OF NIGERIA PLC)

 Format: MS WORD ::   Chapters: 1-5 ::   Pages: 72 ::   Attributes: Questionnaire, Data Analysis,Abstract  ::   5110 engagements

CHAPTER ONE INTRUDUCTION BACKGROUND OF STUDY A farmer, who plants corps, expects result, similarly to student who sits for examination expects results. The same 5 also true of an investor. For the ...Continue reading »

A CRITICAL ANALYSIS ON THE USE OF FINANCIAL STATEMENTS IN ASSESSING THE PERFORMANCE OF AN ORGANIZATION (A CASE STUDY OF FIRST BANK NIGERIA)

 Format: MS WORD ::   Chapters: 1-5 ::   Pages: 72 ::   Attributes: Questionnaire, Data Analysis  ::   18289 engagements

ABSTRACT This project work is carried out to examine the contribution of micro finance banks to the development of Small and medium scale enterprises in Nigeria. The Brass micro finance bank is used a...Continue reading »

A CRITICAL APPRAISAL OF CURRENT ASSETS MANAGEMENT IN PUBLIC LIMITED LIABILITY COMPANIES

 Format: MS WORD ::   Chapters: 1 - 5  ::   Pages: 80 ::   Attributes: Questionnaire, Data Analysis,Abstract  ::   3640 engagements

ABSTRACT This project examined the management of current assets in public Limited Liability Company. It is obvious that no company can perform well without good current asset management. This cares f...Continue reading »

A CRITICAL APPRAISAL OF CURRENT ASSETS MANAGEMENT IN PUBLIC LIMITED LIABILITY COMPANIES

 Format: MS WORD ::   Chapters: 1 - 5 ::   Pages: 55 ::   Attributes: Questionnaire, Data Analysis, Abstract

CHAPTER ONE 1.0 INTRUDUCTION: Current assets as one of the management tolls of business organization are very important in the proper function of business and achievement of organizational goal. Cur...Continue reading »

A CRITICAL ASSESSMENT OF THE SURVIVAL STRATEGIES OF DEPOSIT MONEY BANKS IN A DEPRESSED ECONOMY

 Format: MS WORD ::   Chapters: 1 - 5 ::   Pages: 68 ::   Attributes: Questionnaire, Data Analysis,Abstract  ::   1808 engagements

CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY Nigerian economy is faced with national and global economic challenges and as such, the financial institutions, especially the banking sector ha...Continue reading »

What are looking for today?

WHAT OUR CUSTOMERS ARE SAYING:
  • 1. Abubakar Sani from Nigerian Investment Promotion Commission said "I had a wonderful experience using ProjectClue, they delivered not only on time, but the content had good quality. I recommend ProjectClue for any project research work.".
    Rating: Excellent
  • 2. Ogunniran Olawale from Ekiti state university said "Projectclue is really safe and reliable Quick access to project works Nice customer service Fast delivery of request Recommend this toy fellow students ".
    Rating: Excellent
  • 3. Fahat Nasir from isa kaita college of education dutsinma said "Fish farming a solution unemployment ".
    Rating: Very Good
  • 4. Ajimbi Oluwarotimi from Theology school osun said "Good ".
    Rating: Very Good
  • 5. Clement Abdullahi Ogiji from National Open University of Nigeria said "I am a living witness and have recommended project clue to a lot of students, so far none have been disappointed, very reliable and, trustworthy and dependable".
    Rating: Excellent
  • 6. Jhuee from Sultan national high school said "Good quality. I recommend project clue for any project research work.".
    Rating: Excellent