Effect of Treasury Management on Profitability of Selected Deposit Money Banks in Nigeria

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Authors: Yunusa Suwaiba Abdulazeez, Modu Hauwa Kumshe, Muhammad Bello Abubakar, Dahiru Mohammed Yole

Abstract

This paper examines the relationship between treasury management and the profitability of selected deposit money banks in Nigeria. The objective was to ascertain whether prudent treasury management practices have a direct bearing on the financial performance of Nigerian banks. Data was sourced from the annual reports of selected banks, regulatory filings, and other relevant financial documents from 2013 – 2022. The findings of the study indicate that current ratio (CR) of DMBs has a positive influence on their profitability, cash to deposit ratio (CDR) has a positive and statistically significant relationship between CDR and profitability, loan to deposit ratio (LDR) reports a negative and statistically significant correlation between LDR and profitability, whereas loan to asset ratio estimation reveals a negative effect of LAR on profitability. The study recommends that bank management should increase the levels of CR, CDR, and FS as these factors are positively correlated with profitability. An increase in these variables is expected to enhance profitability. Conversely, management should not prioritize LDR and LAR in their efforts to boost profitability, as these factors have a negative correlation with profitability. An increase in LDR and LAR is likely to result in reduced profitability.

Keywords: current ratio, cash to deposit ratio, loan to deposit ratio and loan to asset ratio.

2024 - NIJAF - 16 - 207 Yunusa SUWAIBA ET AL. 152-168.pdf

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