ABSTRACT
This research is titled “Liquidity problem in commercial banks” (A case study of first banks of Nigeria).
The key objective of this research work is to find out impact of liquidity problem in Nigerian commercial banks. The project is expected to contribute on efficient management of bank liquidity and academic contribution since it contributes to existing literature.
The problem this research is set to solve is that over the years banks have continued to fail as a result of inadequate liquidity in commercial bank which rise as a result of poor management of cash and credit facilities given to customers. The researcher used library materials and field work to elicit information.
The population of this study consist all the commercial banks in Nigeria but it is restricted to only first bank of Nigeria. In Aba and Owerri in the sample size of 35, this is guided by the knowledge of the bank.
The researcher made use of simple tabulation, percentages and chi-square statistical method. The researcher tested the hypothesis and the following findings were made.
In the finding it showed that credit facilities given to customers do not affect the liquidity of commercial banks and liquidity management in commercial banks help banks get out of liquidity problems.
In recommendation, commercial banks should endeavour to maintain equilibrium between profitability and liquidity, also try and insure their bank with the national deposit corporation. Also the central bank should provide close monitor, and supervisions on the commercial bank, to see that proper liquidity is maintained.
1.0 INTRODUCTION
In Nigeria, the existence of commercial banking started with the establishment of African Banking Corporation in 1892. The purpose of this was to distribute British currency in Lagos and other areas or district. In 1894, the British bank for West Africa was formed which took over the functions of the African Banking Corporation. In 1899, Bank of Nigeria later joined the British Bank of West Africa in 1912. In 1917, Barclays Bank was formed; these were the three first commercial banks to operate in Nigeria. First Bank of Nigeria Plc originated from British bank for West Africa the Union Bank of Nigeria Plc originated from British Bank for West Africa, the Union Bank of Nigeria originated from Barclays Bank.
Furthermore, indigenous commercial banks were incorporated to commence operation; the first among all was the industrial and commercial banks in 1927, which failed in 1930. Following were the indigenous commercial bank that followed suit.
The National Bank of Nigeria 1933 Agbomagbe Bank, now Wema Bank Plc in 1946.
After the first banking ordinances in 1952, many banks died off as a result of inability to meet up with the law. But the African Continental Bank and Agbomagbe bank were able to survive the ordinance.
Banking is an institution, which accept deposits of money and repays cash on demand. Though it provides many services to their customers, its main objective immediate needs with interest. (i.e.) the banks take from the surplus units and give to the deficit units.
For the bank to be able to meet the demand of their customers, they have to maintain good liquidity position. The liquidity of bank means the case to which a bank can convert it’s assets into cash. To maintain good liquidity position, banks have to keep adequate volume of non-earning assets the bank, which include. Cash, which is the most liquid assets of the bank, call money treasuring bill, short-term stock certificate of deposit and other short-term measuring instruments in its portfolio.
Rationale for maintaining liquid assets by banks in its portfolio include:
Therefore, equilibrium has to be maintain between liquidity and profitability though it’s always a conflicting concept.
The bank traces its history to 1894 and the bank of British West Africa. It originally served the British Shipping and trading agencies in Nigeria. The found or, Alfred Lewis Jones, was a shipping magnate who originally had a monopoly on importing silver currency into West Africa through his Elder Dempster shipping company according to him without a bank economics were reduced to using barter and a wide variety of mediums of exchange, leading to unsound practices. A bank could provide a secure home for deposits and also a uniform medium of exchange. The bank primarily financed foreign trade, but did little lending to indigenous Nigerians who had little to offer as collateral for loans.
Post independence
In 1957, Bank of British Africa changed its name to Bank of West Africa. After independence in 1960, the began to extend more credits to indigenous Nigerians.
In 1965, standard bank of South Africa acquired Bank of West Africa and changed its acquisition name to standard Bank of West Africa. In 1969, standard Bank of West Africa incorporated it In Nigerian operations under the name standard bank of Nigeria. In 1971 it listed its shares on the floor of Nigerian stock exchange and placed 13% of its share capital with Nigerian investors. Then after the civil war the bank was control by indigenous directors hence it change its name to first bank of Nigeria.
Presently the bank is one of the top banks in Africa and one of the largest financial groups in Nigeria. The current chairman is Umarn Metallab the bank is the largest retail lender in the nation, first bank has created a small market for some of its retail clients.
At the end of August 2006 the bank had assets to totaling N650 billion Naira ($5 billion dollars). It was also the most highly capitalized stock on the Nigeria stock exchange and had about 10 billion outstanding shares. The bank auditors are Akintola Williams Deloitte and Touche (Chartered accountant). The firm has solid short and long ratings due to its low exposure to non-performing loans.