MANAGEMENT OF BANK LIQUIDITY AS A TOOL FOR VIABILITY
ABSTRACT
The study seeks to determine the linkage between liquidity and banking viability using the panel regression analysis procedure, ordinary least square statistical analysis and Housman test for correlated random.
    The results shows that Bank liquidity managed tends to improve its viability and cash balance with CBN significantly improved banks viability.
    From the result, we therefore recommend thus since viability depends on Banks liquidity, Banks are to improve on these Goals not only profitability.
 TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
1.1    Background of the Study                    
1.2   Statement of Research Problem                
1.3    Objective / Purpose of the Study                
1.4   Research Hypothesis                         
1.5     Scope of the Study                         
1.6    Relevance of the Study Or Justification of the Study    
CHAPTER TWO: LITERATURE REVIEW AND THEORETICAL INSIGHT
2.1    Introduction                                 
2.2    Relevance of Liquidity and Viability In Nigerian Bank    
2.3    The Concept Of Liquidity                    
2.4    Liquidity Component or Sources                 
2.5    Elements of Liquidity                         
2.6    Factors Influencing Bank Liquidity                 
2.7    The Management of Liquidity In Commercial
Banks                                
2.8    Assets Management to Meet Liquidity            
2.9    Liquidity Measurement in Commercial Banks        
2.10    The Concept of Viability                    
2.11    Guidelines for the Development of Liquidity Management Policies                        
2.12 The Importance Of Liquidity In Commercial
Bank Management                        
CHAPTER THREE: METHODOLOGY
3.1     Research Design and Population                
3.2     The Model                                
3.3     The Housman Test for Correlated Random Effects    
CHAPTER FOUR: EMPIRICAL ANALYSIS
4.0     Introduction                            
4.1     Descriptive Statistics                         
4.3     Empirical Results on The Panel Analysis            
CHAPTER FIVE: SUMMARY, RECOMMENDATION AND CONCLUSION
5.1    Summary of Findings                         
5.2    Recommendations                        
5.3    Conclusion                                 
    Bibliography                               

 Appendix                                                 
CHAPTER ONE
1.2    BACKGROUND OF THE STUDY
By far the most important institutions in the Nigeria financial system are the commercial banks and merchant banks. The banks in Nigeria dominate the financial system to the extent of providing up to 66 percent of the total funds raised in the economy in any given year. The bank dominated money markets have been in existence in Nigeria since 1894. The banks have grown in number from only one in 1894 to 13 surviving banks at independence in 1960 and 120 in 1944. By far the largest growth took place between 1986 and 1994 when over 60 licensed banks were established with the liberalization of the economy as one of the policy thrust of the structural adjustment program (SAP).
    However, between 1994 and 1997, the number of banks in Nigeria dropped by 26 due to liquidation while the financial sector relived the distress syndrome of the 1950s. As at December 2000, there were 92 banks in Nigeria made up of 60 commercial and 26 merchant banks. The economy reform programme of the federal government of Nigeria as enunciated in its National Economic Empowerment and Development strategy (NEEDS) in 2003 saw the number of banks drop to 25 in 2005 as a result of the policy driven consolidated and mergers. The banks were required to increase their share holder fund base to N25 billion by December 31, 2005 (Osaze, 2007).
    Commercial banks have overtime become very important institutions in the financial system as they function as retail banking unit facilitating the transfer of financial assets that are well desired from some part of the public (fund lenders) into other financial asset which are more widely preferred by greater part of the public (fund seekers).
    The mortgage crisis of 2007 and 2008 brought to the attention of regulators and investors across the globe for the need for liquidity management in banks. When homeowners at astounding rates began to default on the mortgages that their banks learnt them, necessary cash needed for operations became scarce. Liquidity management has since then grown as a discipline with more and more banks having to create processes and strategies for success. There is no one magic formula for every financial institution, instead businesses must take the time to develop and implement solutions that work for their business strategies and their budgetary requirements.
    Liquidity management is the discipline and practice where financial institutions of all sizes create and implement strategies that include self insurance and purchased insurance to slave off the effects of cash short falls required for business operations. Virtually all economic units including banking needs liquidity.
    The Research Journal of Finance and Accounting 2011, opined that liquidity management is an important aspect of monetary policy implementation, while the other integral component of monetary policy i.e economic management involves promoting sustainable economic growth over the long term by keeping monetary and credit expansion in step with an economy’s non inflationary output potential. Liquidity or reserve management as a short time horizon. In other to maintain relative macro-economic stability, reliance is place on liquidity management to even out the swings in liquidity growth in the banking system.
    According to BRAIMOH. A. 2002 (project work), Banks must maintain a substantial level of their assets in cash or an asset that can be converted into cash quickly. To this extent, the level of liquidity to hold and in what form to hold it has been a major area of management decision. To actualise this plight, banks have wide latitude of assets management and in recent years have been using attraction of liabilities to assist the task. Management of liquidity is an absolute task to banks management in order to enhance continuity and sound business operation in the banking industry. Obviously, an effective and efficient liquidity management can lead to viability.
        In view of the above, it is glaring that the role of effective liquidity management in banks cannot be overemphasized as it is of utmost importance to the banks management and its customers in order to enhance continuity and safeguard against any foreseen and unforeseen activities that are driven by global markets, natural disaster and other catastrophic events. It is essential therefore that banks have the liquidity they need to meet all of the payment obligations as they come due and all of the assets they hold on any given day or at month’s end. Banks and financial institution are only as healthy as the liquidity strategies and implementation plans that they routinely practice to safeguard against any potential downfalls in the market.
       The importance of the subject therefore had prompted the researcher to find out how commercial banks in Nigeria can effectively and efficiently manage their liquidity for utmost viability.
1.2          STATEMENT OF RESEARCH PROBLEM
     Considering the public loss of confidence as a result of bank distress which has bedeviled the financial sector in the last decade and the glaring reason for the distress being insufficient liquidity, the researcher is therefore bothered about the problem of how banks can effectively and efficiently manage their liquidity for viability.
     In the course of this research, the following pertinent questions amongst others will be answered.
i.    How can a bank effectively and efficiently manage its liquidity?
ii.    Does effective and efficient liquidity management lead to viability in the bank.
iii.    Is the level of liquidity maintained in the bank enough to meet the customers demand or needs?
1.3    OBJECTIVE OF THE STUDY
      The competitive environment of the financial institutions is so tense that any commercial bank that aims to survive must be fully aware of the consequences of its liquidity and viability obligations as both can make or mar its future.
    The objective of this study therefore is to:
i.    Understand that correlation exist between liquidity management and a bank’s viability
ii.    To find out if the level of liquidity maintained in the bank is enough to meet the customers demands or needs;
iii.    To offer useful suggestions on how liquidity can be effectively and efficiently managed for viability.
1.4   RESEARCH HYPOTHESIS
         The research hypothesis is stated thus:
      There is a significant relationship between Bank’s liquidity and viability.
1.5     SCOPE OF THE STUDY
        The research work is designed to take an in depth look into the banking industry and critically analyze how liquidity of banks can be managed with particular reference to some commercial banks in Nigeria.
    The time Horizon the study covers is between the year 2008 to 2011. The character of interest or essence used in the study is cash / cash equivalence.
1.6    RELEVANCE OF THE STUDY
   The study attempt to find out how the liquidity of banks can be effectively and efficiently managed for viability in commercial banks in Nigeria.
   The findings will be relevant in the following aspects:
i.    Safeguarding the bank against any foreseen and unforeseen activities that are driven by global market, natural disaster and other catastrophic events.
ii.    Guiding the liquidity manager on how liquidity can be effectively and efficiently managed for utmost viability.
iii.    Protecting commercial banks against failure and enhance their performance.