IMPACT OF LIQUIDITY RISK AND THE PERFORMANCE OF FIRST BANK NIGERIA PLC

Authors

  • LAWAL OLANIYI BABATUNDE Department of Accountancy, Federal Polytechnic Bida, Niger State.
  • ENADEGHE BEST IYOBOR Department of Banking and Finance, Federal Polytechnic Bida, Niger State.
  • EWANSIHA OSARETIN EMMANUEL Department of Banking and Finance, Federal Polytechnic Bida, Niger State.

Abstract

This study examined the impact of liquidity risk on the performance of a quoted Deposit Money Bank in Nigeria (FIRST BANK plc) from 2000 - 2023. The study used ex-post facto research design. Both ordinary least squares and error correction model were applied. It was found that in the short run and long run, loans and advances to total assets (LATA) and loans and advances to total deposit (LATD) were seen to negatively respond to return on asset (ROA) of First bank plc. However, only loans and advances to total deposit (LATD) were significant at 5% level. The study recommended that Quoted Deposit Money Banks should continuously strengthen their liquidity risk management frameworks. This involves a comprehensive assessment of liquidity needs, stress testing, and scenario analyses to identify potential vulnerabilities. Regular updates to policies and procedures should reflect the evolving nature of liquidity risk. Also, Quoted DMBs should formulate robust contingency plans that outline clear procedures for responding to liquidity crises. These plans should include mechanisms for accessing emergency funding, communication strategies, and steps for managing potential operational disruptions. Regular testing and simulation exercises can ensure the effectiveness of these contingency plans.

Keywords:

Liquidity Risk, Loans and Advances to Total Assets, Loans and Advances to Total Deposits, Return on Asset, Financial Performance

Published

31-07-2024

How to Cite

LAWAL OLANIYI BABATUNDE, ENADEGHE BEST IYOBOR, & EWANSIHA OSARETIN EMMANUEL. (2024). IMPACT OF LIQUIDITY RISK AND THE PERFORMANCE OF FIRST BANK NIGERIA PLC. International Journal of Financial Research and Business Development, 5(7). Retrieved from https://mediterraneanpublications.com/mejfrbd/article/view/481