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CHAPTER ONE
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INTRODUCTION
BACKGROUND TO THE STUDY
Liquidity management of a commercial bank is a very vital issue in the banking industry, which has since held an important role in any organization or even business management. No matter the structure or size and even ownership of the organization. Management of liquid asset has to be capable of making sure the various finance planning and controlling are greatly efficient. ( Kurla lumpur )
Liquid asset management entails having asset and investment in security that are easily convertible at a short notice without a loss to the bank together with the ability to raise fund from the other source, to enable it to meet its payment obligation and financial commitment in a timely manner and meeting almost all financial emergencies.
Liquidity and profitability are the two corners of a straight line, if you are on the line and move towards one, you automatically move away from the other. In other words there is a trade – off between liquidity and profitability. (puneet & parmil,2012).
It is well known that liquidity asset management is a basic tool of business either private or public organization, and includes also all man power, cash, materials or machines. For this to be effective, liquidity management must contribute to the achievement of the overall cooperate fund management objectives to attain and maintain a balance of profitability, solvency and liquidity in an organization and most especially first bank of Nigeria plc.
This concept tries to strike a level of liquidity that offers a relaxed balance of liquidity and profitability, that is to say the investment of the company in working capital (the crucial part in managing working capital is required in maintaining its liquidity in day – to – day operation to ensure its smooth running and meets its obligation – Eljelly, 2004) must be sufficient. It may generally be assumed that there is always a negative relationship between the two.
But it is not true in all cases. The existence of a linear relationship, though not continuous, between profitability and liquidity corresponding to the holding of current assets at least up to a certain level by firms, is not an impracticable proposition. (Bhunia, khan & mukhuti, 2012).
RELATED TOPIC: Distress In Banking, Causes, Effects And Solutions
1.2 STATEMENT OF PROBLEMS
There are diverse problems found in the management of liquidity by observers, economists and even professionals; Different banks facing different problems in their area of weaknesses. Their financial start up, sources and application of individual funds are different and most entrepreneurs and investors loose substantial part of their funds thereby causing bankruptcy and the firm’s reputation value continue to deteriorate usually in times of favorable business conditions ( pass and pike,1984) which includes.
1. poor management
2. fraud
3. inability to utilize its financial potentials
4. indiscriminate financing
1.3 OBJECTIVES OF THE STUDY
The objectives of this research are to look into how liquid asset is been managed and handled in First bank of Nigeria plc, to guide and maintain balance of profitability, solvency and liquidity. It’s also aimed at concrete control to customers borrowing of limited resources available to the banks. Others objectives includes;-
To identify problems encountered by banks in managing liquidity asset.
To look at the liquidity management of the bank in Nigeria with more emphasis on their investment liquidity and profitability portion.
To look at the effectiveness and management of the portfolio, by employing and using various approach, theories and instrument in solving their liquidity profitability problems.
To find out whether considerable achievement has been made in the areas of its liquidity management.
RESEARCH QUESTIONS
1. What is the importance of an efficient liquidity management in first bank Nigeria Plc
2. To what extend has liquidity management in first bank evaluate the performance of the economy3.
What are the techniques of liquidity management in first bank Nigeria plc?
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