The Effect of Liquidity Management On the Financial Health of Deposit Money Banks in Nigeria

This study examined the effect of liquidity management on the financial performance of Deposit Money Banks. The objectives of this study were to determine individually and jointly, the extent to which liquidity ratio, Loan-to-Deposit ratio and Current Ratio significantly affects the financial performance of DMBs in Nigeria. Five (5) Deposit Money Banks were chosen through a purposive sampling technique and data were collected mainly from secondary sources, specifically banks’ financial reports and relevant information obtained from the banks and CBN for the period 2015–2024. Financial performance was proxied by Return on Investment( ROI) while liquidity management was proxied by Liquidity Ratio, Current Ratio and Loan to Deposit Ratio The statistical technique used in analyzing the data is multiple linear regression analysis, with SPSS Version 23 employed for computation. Findings revealed that liquidity ratio and current ratio has a positive significant effect on financial performance, while loan-to-deposit ratio has a negative significant effect on financial performance on financial performance of DMBs in Nigeria. Thus, it was concluded in the study that banks must strive to maintain an optimal level of liquidity sufficient to ensure stability but not excessive to the point of reducing earning capacity.