IIARD International Institute of Academic Research and Development

IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH (IJBFR )

E-ISSN 2695-1886
P-ISSN 2672-4979
VOL. 10 NO. 10 2024
DOI: 10.56201/ijbfr.v10.no10.2024.pg129.148

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Liquidity Risk Management and Financial Performance of Microfinance Banks in Nigeria

AKPORHUARHO, Kevin Akpotu & Prof. ONUORAH, A. C.

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Abstract

This study examined the analysis of the effect of liquidity risk management on financial performance of microfinance banks in Nigeria from the period of 1990 to 2022 (33years). In order to evaluate the effect of liquidity risk management on financial performance of microfinance banks in Nigeria, the following measures liquidity risk management, namely; Current Ratio (CR), Quick Ratio (QR), Maturity Gap (MG) and Liquid Asset to Total Asset Ratio (LATAR) in relation to Returns on Asset (ROA) proxied for the financial performance of Microfinance Bank in Nigeria. The CBN Statistical Bulletin, CBN Annual Report and CBN Bank Supervisory Annual Report from 1990-2022 were used to acquire data for the research. Descriptive statistics, correlation analysis, diagnostics tests, unit root test, and multiple regression analysis were used to assess the research hypotheses. Based on the results of the previous sections, CR and QR has a positive significant effect on ROA while MG and LATAR has insignificant effect on ROA of microfinance banks in Nigeria. The study recommended that managers of financial institution should from time to time train customers with regard to ATM, its benefits, risk exposure, physical and electronic security to avoid financial loss in the hands of hackers, trainings should be held for bank staff in short periods to acquaint them with modern developments of the sophisticated technology in changing times to improve the financial inclusion in Nigeria. In the light of the findings, it evident that measures of liquidity risk management used has mixed effects on financial performance in Nigeria. However, majority of the independent variables such CR and QR has significant effects on ROA of Microfinance Banks in Nigeria while MG and LATAR established an insignificant effects on ROA of Microfinance Banks in Nigeria. Hence, the study concluded that liquidity risk management on financial performance of Microfinance banks in N

keywords:

Liquidity, Risk, Current Ratio, Quick Ratio, Maturity Gap, Liquid Asset and

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