CHAPTER ONE
INTRODUCTION
1.1 Background to the study
The unique role of banks as engine of growth in any economy has been widely acknowledged. Banks occupy central position in the country’s financial system and are essential agents in the development process. The intermediation role of banks can be said to be a catalyst for economic growth as investment funds are mobilized from the surplus units in the economy and made available to the deficit units. By intermediating between the surplus and deficit units within an economy, banks mobilize and facilitate efficient allocation of national savings, thereby increasing the quantum of investments and hence national output. Banks as financial intermediaries provide avenue for people to save incomes not expended on consumption. It is from the savings accumulated that they extended credit facilities to the entire economy. To perform their role effectively deposit money banks (DMBs) have to be adequately liquid. This implies that the survival of deposit money banks depends largely on its liquidity, because illiquidity being a sign of imminent distress can easily erode the confidence of the public in the banking sector hence sound liquidity is inevitable.
Liquidity management helps deposit money banks to maintain stability in operations and earnings by serving as a guide to investment portfolio packaging. Effective liquidity management serves as a veritable tool through which deposit money banks maintain the statutory requirements of the central bank as it affects the proportion of deposits to liquid assets and deposits to loans and advances. Liquidity management reduces the incidence of bankruptcy and liquidation which can be the later effect of illiquidity, and help them to achieve some margin of safety for their customers’ deposits. Adequate liquidity helps banks to sustain public confidence of the depositors and the financial markets. Liquidity management assists banks in trading off between risk and return; and liquidity and profitability. It serves as a tool through which deposit money banks avoid over liquidity and under liquidity and their consequences. It also enables the banks to avoid forced sales of unfavourable and unprofitable venture or its assets to generate cash. It is for this reason; governments of countries through their apex bank and other relevant authorities formulate reform policies and programme for banking industry (Olagunju, Adeyanju, and Olabode 2011).
The importance of accurate liquidity management cannot be over stressed as it reveals the liquidity positions of the banks through which the operators of the financial market and other creditors adjudged the credit worthiness of the banks. Liquidity management requires an appraisal of holdings of assets that may be turned into cash. The determination of liquidity adequacy within this framework requires a comparison of holding of liquid assets with expected liquidity needs. The stock concept of liquidity management is widely used and involves the application of financial ratios in the measurement of liquidity positions of deposit money banks. One of the financial ratios used in such measurement is liquidity ratios which measures the ability of the bank to meet its current obligations. Other ratios which have been developed to measure liquidity are liquid assets to total assets; liquid assets to total deposits; loans and advances to deposits. Calculating the ratio of liquid assets to total assets explains the importance of a bank's liquid assets among its total assets. It indicates the proportion of a bank's total assets that can be converted into cash at a short notice. Cash ratio to total deposits or assets is another measure of bank liquidity. Its advantage over others is that liquid assets are related directly to deposits rather than to loans and advances that constitute the most illiquid of banks assets. The ratios serves as a useful planning and control tool in liquidity management since deposit money banks use it as a guide to extend credit to the economy ( Olagunju, Adeyanju , Olabode 2011).
| Review project details | Comments |
|---|---|
| Number of Pages | 57 pages |
| Chapter one (1) | Yes Introduction |
| Chapter two (2) | Yes Literature review |
| Chapter three (3) | Yes methodology |
| Chapter four (4) | Yes Data analysis |
| Chapter five (5) | Yes Summary,discussion & recommendations |
| Reference | Yes Reference |
| Questionnaire | Yes Questionnaire |
| Appendix | yes Appendix |
| Chapter summary | yes 1 to 5 chapters |
| Available document | PDF and MS-word format |
DOWNLOAD COMPLETE WORK
All listed topics on our website are available project materials in PDF and MS word files, well supervised and approved by lecturers who are intellectual in their various fields of discipline, documented to assist you with complete, quality and well organized researched work. if you can't find what you're looking for feel free to contact us.
FOLLOW US