CHAPTER
ONE
1.0
INTRODUCTION
BACKGROUND OF THE STUDY
In every system, there are major component that are
paramount for the survival of the system. This is applicable to financial
system. The banking institution had contributed significantly to the
effectiveness of the entire financial system as they offer an efficient institution
mechanism, through which resources can be mobilized and directed from less
essential uses to more profitable and productive investment. The performance of
these financial institutions has proved to be effective channel between savers
and borrowers. These important roles are played by merchant banks, savings
banks, the control banks and development banks.
The banking industry have overtime function in vital
banks units facilitating the transfer of assets that are well desired from the
public (fund lenders) into other financial assets which are more widely
preferred by grater part of the public (fund sackers). Thus, banking industry becomes
the bedrock of the two functions of Nigeria banking system, which are deposit
mobilization and credit extension. Therefore, an adequate financial system
requires the attention of the banks management of profits and liquidity, which
are two conflicting goals of Nigeria banking system. Profits and liquidity are
effective indicator of the corporate health and performance of not only the
banking system (Elyelty 2004), but all profit oriented ventures.
Therefore, these roles involves bringing together of
people who have money and those who need money is crucial in this discussion.
So also certain critical factors that are required to facilitate liquidity
management and a stable, sound, competitive, financial system adequate
regulating, and supervisory, framework and macro-economics capacity buildup.
1.2
STATEMENT
OF RESEARCH PROBLEM
Liquidity on
banks profit management in banking industry, the problem innocent in Nigeria
banking system is inter-mediation roles, the bank of industry idle funds borrow
from lenders to investment such funds indifferent classes of portfolio. Such
business activities of the banks is not without problems since the deposit from
these funds savers invested by the banks profit maximization can be record and
demanded when the later is not in position to meet their financial obligation
so also considering the public laws of confidence as a result of banks distress
which bedeviled the financial sector in Nigeria
They
intensified competition in the banking sector as a result of terrific emergence
of large number of new banks. The problems then become how to identify the
optimum point or the level at which banks industry can maintain its assets in
other to optimize these two objectives; since each of the liquidity has a
different effect on the level of profit. So also profit maximization as the
resulted liquidity can lead to both technical and legal insolvency with
consequence of low patronage and deposit flight; erosion asset base; other
problems includes, excess liquidity, balancing the proportion of the deposit
that will be demanded by the depositors at any point in time, and finally
accurate selection of the factor that influence the level on banks liquidity
possess some problems. All these problems are what the study intends to
consider.
1.3
OBJECTIVES
OF THE STUDY
The primary objective of the study will be to examine
the significance of the liquidity and profit management to efficient,
continuity and evolution of Nigeria banking industry. Other objective includes;
_To investigate the issue of profit and
liquidity management.
_To
evaluate the extent to which profit and liquidity affect other elements of the
banks managements.
_How
banks can enhance their liquidity effect on other element of the bank
management.
_How
banks can enhance their liquidity and profits position.
1.4
RESEARCH
METHODOLOGY
This study is
predominantly base on data derived from both primary and secondary source. The
primary data shall be collected through questionnaire because it provides a
cheap means of collecting information from a greater number of people. Also it
enables us to reach out respondent who are otherwise inaccessible.
In respect of secondary data which shall be
collected, will consist mainly extraction of information from performance
service report of the banks and the journal, the secondary data will be
collected from newspaper, textbook, unpublished lecture note, internet research
work, seminal official publication and historical document which hope will
provide an insight into the history of liquidity and profit management in
banking industry and its effects on the banks.
In analyzing
data, the descriptive method of analyzing data shall be used. This involves
simple calculation of data and interpreting the graph and charts.
1.5
SIGNIFICANCE
OF THE STUDY
The importance of the study will be to account for
factor responsible for inherent challenges confronting banks of industry in
managing liquidity and profits in the bank. Also it will contribute to human
knowledge and complement other literature in the field of accounting, economics
and banking.
1.6
SCOPE
OF THE STUDY
The main purpose of this research work is to study
the general basic principle applicable in liquidity and profits management in
Nigeria banking industry. Therefore, the study will critically examine the
component of profits and liquidity of banks of industry at a glance through
treasury management.
1.7 PLAN AND
ORGANIZATION OF THE STUDY
This research
work will be organized into five chapters.
Chapter one is the introductory aspect of the work
which deals with background of the study, statement of the problem, objective
of the study, scope of the study, research methodology and organization of the
study.
Chapter two
will also include literature review breakdown into sub-heading.
Chapter three will also contain research methodology
of the bank used as a case study.
Chapter four is basically the body of research. It
examined the liquidity and profits management in banks of industry.
Chapter five will consist of the summary and the
conclusion of the whole chapter of the project and the recommendation.