Impact of Liquidity Management on Financial Performance of Money Deposit Banks in Nigeria.

ABSTRACT This study examines the impact of liquidity management on the financial performance of deposit money banks in Nigeria over a six-year period (2018-2023). Effective liquidity management is crucial for maintaining the stability and profitability of banks, ensuring they meet short-term obligations while achieving optimal asset utilization. The research utilizes secondary data obtained from the annual reports of the three selected banks; Eco Bank, Zenith Bank , First Bank , focusing on key liquidity indicators such as cash reserve ratio, liquidity ratio, and loan-to-deposit ratio. Financial performance is assessed using return on assets (ROA) and return on equity (ROE). The findings reveal a significant relationship between liquidity management and financial performance, indicating that excessive liquidity adversely affects profitability, while inadequate liquidity heightens financial risk. The study also identifies challenges in the regulatory environment and economic fluctuations as critical factors influencing liquidity management. Recommendations include adopting proactive liquidity policies, leveraging technological innovations, and strengthening regulatory compliance to enhance performance and sustain financial stability. This study contributes to the body of knowledge on liquidity management practices and provides insights for policymakers, regulators, and bank managers in optimizing liquidity strategies.