Strategies For Management Bank Liquidity

INTRODUCTION
Virtually, all economic units need liquidity, and banks are no exception. Demand deposits, which represent a major proportion of bank liabilities, constitute a large percentage of the nation’s money supply. Each bank must therefore maintain a substantial part of its assets in cash or in cash assets that can be converted into cash quickly. Since demand deposit represent a high proportion of bank’s liabilities, they at all times, try to prevent a rush on their liquid position. When therefore a bank is faced with infrequent loan demands, the banker is guided by what is known as liquidity ratio. The banker has to determine the ratio of loans to deposit cash ratio and legal requirements. The banker must be sure that at all times, it complies with the central bank of Nigeria liquidity requirements. The banks will put into consideration the ratio of loans to deposit liabilities. When the ratio of loan to deposit liabilities rises to a relatively high level bankers become less inclined to lend and to invest.
Commercial Banks employ different strategies to maintain adequate liquidity and these strategies include:
1. Lending only for short term commercial purposes.
2. Maintaining liquid assets, which ranges from cash to money at call and bills discounted.
3. They also hold deposit at the central bank.
The combination of earning of liquid is especially relevant for commercial bank managements in Nigeria. This is because the ultimate objectives of a commercial bank is to make profits at all, the banker must maintain confidence, and to maintain confidence he must maintain an adequate degree of liquidity in highs assets.
It is therefore against this bank ground that the researcher wishes to examine the concept of liquidity management strategies adopted by First Bank of Nigeria Plc.

1.1 STATEMENT OF PROBLEM
The major problem inherent in strategies for managing bank liquidity in this research work is how to determine the extent of liquidity holdings of a bank at a particular point in time in order to meet up the various financial obligations of the bank to their borrowing customers.
There is no doubt that for any bank to survive successfully and consequently maintain the public trust and confidence in their banking operations, it has to adopt strategies that shall put in place an adequate liquidity so that the various demand of customers shall always be met. If a bank fails to maintain enough liquid assets in their banking management, it stands the risk of jeopardizing their existence by loosing their various. Customers and public confidence in there banking operations.
To measure the liquidity that a bank needs at a particular points in time, it would require an accurate forecasting of cash needs and the expected level of liquid asset and cash receipts over a given period of time.
Besides, it is important to note that in view of maintaining enough liquidity, the central bank of Nigeria (CBN) have adopted some measures by stipulating that banks should be able to maintain a cash reserve ratio of 5% and liquidity ratio of 25%. Apart from this, the CBN strictly regulate the commercial banks’ activities through the banking act of 1969 and currently through the bank and other financial institutions decree of 1991.
The above hold attempts, were the various measures that have been taken so far by the regulatory authorities of our financial system to address this problem without success.

1.2 OBJECTIVES OF THE STUDY
This study intends to achieve the followings:
1. Find out the factors that are highly considered by banks in their liquidity needs.
2. Evaluate the effectiveness of the bank liquidity management strategy adopted over the years.
3. Find out the liquidity management need of banks.
4. Identify problems that confront bank’s liquidity management strategy.
5. Find out ways and means through which these problems can be solved.

1.3 SIGNIFICANCE OF THE STUDY
This research work is carried out to ascertain how first Bank of Nigeria Plc have been able to maintain an adequate liquidity management over the years.
The research work will be of immense, since it is a partial fulfillment for the award of Higher National Diploma in Accountancy Department of the Institute or Management and Technology Enugu.
The findings will also be useful to researchers in the field, scholars and others in the banking industry.
Finally, the findings will be used by both the government, the Central Bank of Nigeria and then serve as an avenue for commercial banks to understand the criteria to be adopted in determining the level of liquidity to maintain the level of liquidity to maintain at any particular time so as to achieve its corporate goals.

1.4 SCOPE AND LIMITATIONS OF THE STUDY
This research work concentrated on the operational activities of the First bank of Nigeria Plc in managing it’s liquidity.
The period in review is between 1998-2004.
The researcher faced some limiting factors in the process of information gathering.
1. Financial Constraints, Caused by the huge amount of money required.
2. Time constraints, because of other numerous academic engagements.
3. There is also the problem of death of data to obtain the needed information.
Nevertheless, these limitations were not sufficient enough to make the objective of the study unrealizable

1.5 RESEARCH HYPOTHESIS
In furtherance of this research, the following hypothesis are formulated and will be used in the analysis of the study.
1. First Bank of Nigeria Plc considered it necessary to adopt policies on liquidity management.
2. Low liquidity has no impacts on the overall performance of the bank.