This project is a very crucial study for the Nigerian commercial banks. The study was motivated by the necessary to establish a way in which liquidity problems in Nigerian commercial banks. Shall be tackled. Also it is a known fact that this work dwelt much on the effect of liquidity problems in Nigerian commercial banks with reference to the effectiveness of government policies and to the bank profit.

To solve the research problems only the secondary data were collected in this study. The principle sources of secondary data were from text books, newspaper etc. they were also collected from both published and unpublished material from the following places, National library Enugu, institute of management and technology Enugu. Based on the findings it was found that excess liquidity indicate a rise in the money on circulation and this tread have been feared to subsequently attract inflationary pressure on the economy. The conclusion of this study is that commercial banks should keep some of their assets equal to a certain percentage of their deposit in liquid form. So as to avoid liquidity problems in commercial banks.

TABLE OF CONTENTS.

COVER PAGE

TITLE PAGE.

APPROVAL PAGE

DEDICATION.

ACKNOWLEDGEMENT

ABSTRACT

TABLE OF CONTENT.

CHAPTER ONE:

INTRODUCTION

BACKGROUND OF STUDY

STATEMENT OF PROBLEMS

OBJECTIVE OF STUDY

RESEARCH QUESTIONS

SIGNIFICANCE OF THE STUDY

LIMITATION OF STUDY.

CHAPTER TWO:

REVIEW OF RELATED LITERATURE LIQUIDITY VERSUS PROFITABILITY IN COMMERCIAL BANK EQUILIBRIUM BALANCE BETWEEN PROFITABILITY AND LIQUILITY.

LIQUILITY RATIO

SIGNIFICANCE OF LIQUILITY RATIO

COMPUTATION OF LIQUILITY RATIO CASH RATIO

LIQUILITY RISKS

LIQUILITY MEASUREMENTS

RATIONALE FOR LIQUILITY RATIO MEASUREMENT

FACTORS AFFECTING LIQUILITY OF COMMERCIAL BANKS

FEDERAL GOVERNMENT STEPS TOWARDS

SOLVING LIQUIDITY PROBLEMS IN COMMERCIAL BANKS

REFERENCE

CHAPTER THREE:

RESEARCH METHODOLOGY

SOURCES OF DATA

LOCATION OF DATA

METHOD OF RESEARCH INVESTIGATION

CHAPTER FOUR:

FINDINGS

CHAPTER FIVE:

RECOMMENDATION, CONCLUSION AND BIBLIOGRAPHY.

RECOMMENDATION

CONCLUSION

BIBLIOGRAPHY.

PROPOSAL PAGE.

The main objective situated under this study is the liquidity problems in Nigerian commercial banks. The study has been formed into five (5) chapters to make it easy reading and understanding.

Chapter one deals much on the effect of liquidity problems in Nigerian commercial banks with reference to the effectiveness of government policies and to the banks profit. It also gives an insight to commercial banks on how to keep certain percent of their deposit in liquid form, so as to meet promptly demands for deposits withdrawals. Through this, other four (4) chapter were derived that is base from chapter one (1) in order to confirm the findings, recommendation and conclusion.

All the same from the prospective of central bank of Nigeria, excess liquidity indicate a rise in money in circulation and this trend have been feared to subsequently attract inflationary pressure in the economy. And again if commercial banks keep excess liquidity in their vault as an idle cash, it will then have the adverse effect of reducing their profit and therefore a serious set back.

In view of the findings above, recommendations have been made that the central bank of Nigeria has a lot of role to play being the apex bank and the monetary authority in every commercial banks.

PROJECT FORMAT.

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

STATEMENT OF THE PROBLEMS

OBJECTIVE OF THE STUDY

SIGNIFICANCE OF THE STUDY

LIMITATION OF THE STUDY

DEFINITION OF TERMS

REFERENCES

CHAPTER TWO

REVIEW OF RELATED LITRATURE

CHAPTER THREE

RESEARCH DESIGN AND METHOLOGY

SOURCES OF DATA (SECONDARY DATA ONLY)

LOCATION OF DATA

METHOD OF DATA COLLECTION OR RESEARCH INVESTIGATION

CHAPTER FOUR

SUMMARY OF FINDINGS

CHAPTER FIVE

RECOMMENDATION

CONCLUSION

BIBLOGRAPHY.

CHAPTER ONE

INTRODUCTION

There was a time when trade by barter was the order of the day, come to think of that, there was nothing like money rather than liquidity problems. But when money (cash) was introduced and there was operations of banks in so many places in the country, liquidity problems emanated. However the purpose of this work is to state the effect of liquidity problems in Nigerian commercial banks with reference to the effectiveness of government policies and to the banks profit.

BACKGROUND OF STUDY.

According to oxford advanced learners dictionary liquidity means the state of owning things of value that can be easily changed into cash. EBELE OGAMBA in his book BANKING LENDING AND LOAN ADMINISTRATION SECOND EDITION, define liquidity as the ease and speed with which an assets can be converted or transformed into cash. In other word liquidity of bank simply means “the ease with which banks assets could be converted into cash”. These assets include cash in the banks vault, cash with the central bank and other government securities that have not been used as collaterals for loans. But the most liquid of all these assets is cash.

The balance of the bank account and cash on hand are of curse perfectly liquid where as debtors are near liquid. Stock is not as liquid as debtors because it has to go through the process before it becomes cash. In any business certain liabilities have to paid off in very future and part of the interpretation procedure must be in seeing that payment which are due can infact be meet. This is one of the reasons why banks will be liquidity enough. There are so many other reasons why a bank should have reasonable liquid assets in its assets portfolio. These include to be able to meet promptly demands for deposit withdrawals that is the banks must maintain confidence and also be able to use profitable opportunities that may come out in future.

It should be noted that banks like most other business are profit oriented, for instance operating to make profit for their shareholders. The profit could be realized if there is enough deposits. And the deposits will not come unless the deposition could be assured of the safety of their deposits, there has to be enough liquidity in the bank. However it is the fact that action designed to make more profit brings about liquidity in the bank and vice versa. In Nigeria, the activities of the commercial banks are regulated by the banking act of 1979 as amended under the control of central bank of Nigeria. The important of these regulations were to maintain trust and confidence in banking systems as well as to achieve a specific economic objective.

Thus in the period of mounting excess liquidity as was the case in the 1970’s, banks were excepted to hold some of their assets equal to a certain percentage of their deposits in liquid form. This is know as LEGAL RESERVE REQUIREMENT. The rationale for the use of this instruments was to map out the to stop the inflationary trend in the economy. The excess liquidity in the ecomy and also to stop the inflationary trend in the economy. The excess liquidity in the banking sector gave rise to inefficiencies in banking operation. Banks staffs were no longer polite to their customer, they become arrogant since they had little outlets to invest their money. Banks however have devise new method of attracting deposits from customers.