Tag Archives: Liquidity Ratio

Operational Risk Management and Financial Stability of Deposit Money Banks in Nigeria (Published)

The series of financial crisis that have been experienced in both the developed and developing countries showed the importance of having well-functioning financial systems as financial crises directly affect the health of a country’s economy. Many banks had collapsed or experienced serious financial constraints both in Nigeria and the rest of the world due to their continuous exposure to severe operational risk events and fraudulent actions and these have continued to be major threat to the banks. This study investigated the effect of operational risk management on financial stability of deposit money banks in NigeriaThe study employed ex-post facto research design. The population comprised twenty-two licensed deposit money banks in Nigeria as at September 30th, 2018. A total sample of eleven deposit money banks were selected using convenient sampling method and data covering 2009 to 2018 were sourced from the audited and published financial statements of these sampled deposit money banks. Certification of the financial statements by external auditors and regulators and the approval by the board of directors confirm the reliability of the data. Data were analysed using descriptive and inferential statistics.The results showed that operational risk management had negative significant relationship with financial stability of the selected banks in Nigeria (F(3,106)= 24.46, Adj. R2= 0.4091, p < 0.05). Specifically, Non-performing loan to total loan ratio, cost to income ratio and total loan and advances to total deposit ratio have significant relationship on the variables of financial stability of deposit money banks in Nigeria proxied by Capital Adequacy Ratio (F(3,106)= 18.23, Adj. R2= 0.316, p < 0.05), Return on Equity (F(3,106)= 22.52,  Adj. R2= 0.389, p < 0.05) and Liquidity Ratio (F(3,106)= 22.45, Adj. R2= 0.389, p < 0.05)The study concluded that operational risk management influences the financial stability of selected deposit money banks in Nigeria. The study recommended, among others, that banks should improve their operational risk management practices and policies in order to maintain sound capital adequacy and sustainable financial stability.

Keywords: Capital Adequacy Ratio, Deposit Money Banks, Liquidity Ratio, Non-Performing Loans, Return on Equity, cost to income ratio, financial stability, operational risk management

Effect of Bank Specific Factors on Bank Loan Performance in Nepal (Published)

This study examines the effect of bank specific factors on loan performance of commercial banks in Nepal. Bank size, capital, deposit, liquidity ratio and lending interest rate are taken as bank specific factors. The study has conducted correlation and regression analysis using panel data of twenty four commercial banks during the period of 1996 -2017. The empirical results show that bank size, capital and deposit have positive impact on bank lending. Hence, commercial bank willing to increase lending should increase its capital, even more than regulatory standard. Further banks willing to lend more should expand their total assets and deposit. Liquidity ratio and interest rate have negative impact on bank lending. Thus, commercial banks willing to increase bank lending, should be careful in maintaining minimum liquidity requirement and interest rate fluctuation. Central bank willing to increase bank lending to productive sector should encourage banks to decline their lending interest rate.

Keywords: Bank Lending, Capital, Deposit, Interest Rate, Liquidity Ratio, Regression, Size

Macroeconomic Analysis of the Relationship between Monetary Policy Instruments and Inflation in Nigeria (Published)

This study examined the role of monetary policy instruments in controlling inflation in Nigeria. The study adopted interest rate, minimum rediscount rate, liquidity ratio, and cash reserve ratio as proxy for monetary policy instruments and the independent variables. These were regressed against inflation rate, the dependent variable. Secondary time series panel data for the period covering 1982 to 2011, were collected from the Central Bank of Nigeria (CBN) Statistical Bulletin in 2011. The study employed multiple regression technique based on E-views 7 computer software to analyze data obtained on the study variables. Four hypotheses were tested and the null hypotheses were accepted based on the regression results. The study found that interest rate, minimum rediscount rate, liquidity ration and cash reserve ratio had no significant influence on inflation. The study recommended that Nigeria shift from being a consumption driven (import) economy to production based (export) economy for the impacts of these policies to achieve desired results.

Keywords: Cash Reserve Ratio, Inflation, Liquidity Ratio, Minimum rediscount rate, Monetary Policy

Effects of Financial Inclusion on the Economic Growth of Nigeria (1982-2012) (Published)

Inclusive financial arrangement is becoming a policy issue in both developed and developing nations of the world as it has been perceived as a veritable tool for poverty alleviation and economic development. This paper examines the effects of financial inclusion on the economic growth of Nigeria (1982-2012). Data for the study are collected mainly from secondary sources such as Statistical Bulletins of the Central Bank of Nigeria (C.B.N.), Federal Office Of Statistics (F.O.S.) and World Bank. Employed data consist of such bank parametric as Branch Network, Loan to Rural Area, Demand Deposit, Liquidity Ratio, Capital adequacy, and Gross Domestic Product. Extracted data spanning about thirty-year period; 1982 to 2012 were related using the Ordinary Least Square (OLS) method (STATA 10). Tested hypothesis on Poverty Reduction found Loan to Rural Areas(LRA)Agric. Guaranty Fund (ACGSF)significant to Per Capital Income(PCI) (@5%)given t-stat2.82,p>t=4.85 while Financial Deepening(FDI) and Broad Money(FD2) also significantly influenced Economic Growth(Using GDP)with t-stats=3.61, 4.85 p>t=0.0013 and 0.000 respectively. Deposits From Rural Areas(DRA)as surrogate for financial inclusion is influenced by Loans to Rural Areas (LRA) and Small Scale Enterprise (LSSE)as surrogates for financial intermediation given t-stats=2.2 and2.9with p-values=0.03 and 0.007. The overall results of the regression analysis show that inclusive Bank financial activities greatly influenced poverty reduction(R2=0.74) but marginally determined national economic growth and Financial Intermediation through enhanced Bank Branch Networks, Loan To Rural Areas, and Loan To Small Scale Enterprise given about 50% relatedness between variables on either sides of the equations. Policy recommendations are made on the basis of these findings.

Keywords: Agricultural Guarantee Scheme Fund, Bank Branch Network, Financial Inclusion, Liquidity Ratio, Loan to Rural Area, economic growth