EFFECT OF LIQUIDITY RISK AND LIQUID ASSET ON THE PROFITABILITY OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Global financial meltdown in the past decade clearly exposed significant failures within the structures of the financial systems that support liquidity risk management in banks across the world. The research aims at establishing the effect of liquidity risk on the profitability of listed deposit money banks in Nigeria. Study was centered on a representative sample of 14 listed deposit money banks in Nigeria on five years period (2015 to 2019). Secondary data were obtained from the fourteen listed deposit money banks in Nigeria. The study has employed the use of OLS and GLS regression model to analyze the effect of liquidity risk on the profitability of the selected firms. The study result shows that liquidity risk (LQR) is significantly associated with profitability, but the extent of the relationship is a negative correlation. While liquid asset (LQA) of banks is not significantly related to their profitability and the extent of the influence of liquid assets on profitability of these banks is positive though not strong because the correlation between them is a weak one. The study therefore concluded that Liquidity risk (LQR) have negative significant impact on profitability while an insignificant positive relationship exists between liquid asset (LQA) and profitability. Based on these findings, it is recommended that banks' management should reduce LQR with at least 1.9% to increase their profitability. Hence, CBN must also emphasize on the need for banks to adhere to prudential guidelines and liquidity exposure to enhance profitability.