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Bullion

Keywords

Statutory Liquidity, Return on Asset, Prediction

Abstract

This study investigated the predictive power of banks' statutory liquidity on their protability in Nigeria between 1990 and 2019. The vector autoregression and variance decomposition methodology were employed. The findings showed that a change in return on asset (ROA) was weakly associated with itself, with liquidity variables, liquidity risk and real gross domestic product growth rates. In a five-year prediction, a 100% change in ROA was explained by itself in the short run. Other variables showed strong exogeneity with ROA, from short to long-run, an indication that banks in Nigeria face bleak future in using statutory liquidity to positively and signicantly affect profitability. Understanding these findings would assist policymakers in their liquidity/protability policy making, and the banks to re-strategize in their liquidity management.

Author Bio

The author is of the Banking and Finance Department of Abia State University, Uturu

Publication Title

Bullion

Issue

2

Volume

45

First Page

18

Last Page

31

Included in

Economics Commons

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