LIQUIDITY PROBLEMS IN COMMERCIAL BANKS

​​​​​​Background of the study: Banking operation which can be traced back to the early colonial period has helped in economy growth and development of a country. In Nigeria, the existence of commercial banking started with the establishment of African Banking Corporation in 1892. The purpose of this was to distribute British currency in Lagos and other areas or district. In 1894, the British bank for West Africa was formed which took over the functions of the African Banking Corporation. In 1899, Bank of Nigeria later joined the British Bank of West Africa in 1912. In 1917, Barclays Bank was formed; these were the three first commercial banks to operate in Nigeria. First Bank of Nigeria Plc originated from British bank for West Africa the Union Bank of Nigeria Plc originated from British Bank for West Africa, the Union Bank of Nigeria originated from Barclays Bank.

Furthermore, indigenous commercial banks were incorporated to commence operation; the first among all was the industrial and commercial banks in 1927, which failed in 1930. Following were the indigenous commercial bank that followed suit. The National Bank of Nigeria 1933 Agbomagbe Bank, now Wema Bank Plc in 1946. After the first banking ordinances in 1952, many banks died off as a result of inability to meet up with the law. But the African Continental Bank and Agbomagbe bank were able to survive the ordinance. Banking is an institution, which accept deposits of money and repays cash on demand. Though it provides many services to their customers, its main objective immediate needs with interest. (i.e.) the banks take from the surplus units and give to the deficit units.

For the bank to be able to meet the demand of their customers, they have to maintain good liquidity position. The liquidity of bank means the case to which a bank can convert it’s assets into cash. To maintain good liquidity position, banks have to keep adequate volume of non-earning assets the bank, which include.