Macroeconomic Channel of Global Liquidity and Commercial Banks Soundness in Nigeria
Vol.4 Issue 2
This study analyzes the effect of macroeconomic channel of global liquidity on commercial banks soundness in Nigeria. Cross sectional data of commercial bank soundness was sourced from financial reports of commercial banks while other variables were sourced from Central Bank of Nigeria statistical bulletin. Capital adequacy, assets quality, earnings and profitability and liquidity were used as proxies for commercial bank soundness. Macroeconomic indicators were used as proxies for global liquidity. Ordinary least square methods were used to determine the extent to which global liquidity affect commercial bank soundness. Macroeconomic channel explains 54.6 percent of the variation in capital adequacy, 5 percent of the variation in asset quality and 3 percent of the variation in earnings and profitability and 22 percent of the variation in liquidity. The study concludes that macroeconomic channel of global liquidity has significant relationship with capital adequacy indicator of commercial banks soundness in Nigeria. That macroeconomic channel of global liquidity have significant no relationship with assets quality indicator of commercial banks soundness in Nigeria. That macroeconomic channel of global liquidity have significant no relationship with earnings and profitability indicator of commercial banks soundness in Nigeria. That macroeconomic channel of global liquidity have significant no relationship with liquidity indicator of commercial banks soundness in Nigeria. We recommend that further policies such as banking sector internationalization should be formulated to enhance global liquidity management among Nigeria commercial banks and capital inflow to the Nigeria financial market to achieve greater development in Nigerian financial sector. Policies should be advanced by the regulatory authorities to enhance the operational efficiency of financial market and enhance the money market instrument beyond national boarder to attract foreign portfolio investors in the money market. The capital market regulators should formulate policies to that will cushion the negative effect of international global liquidity on Nigeria capital market.
