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Managing an economy entails  articulate, well meaning strategies and devising various policies and measures that ensure efficient utilization of nation resources with a view to promoting economic growth and a bank is considered liquid when it has asset and investment in security that are easily reliable at a short notice without a loose to the bank together with the ability to raise find from the other source to enable it to meet its payment obligation and maintaining domestic and external sector stability.

          Liquidity management of a commercial bank is a very vital issue in the banking industry. It is the ability of a bank to manage its liquidity position so that neither the liquidity nor the profitable will suffer. There has occurred shift from a region of passive government intervention in various markets towards greater reliance on market face in the allocation of goods, services and financial resources.

          In creating or operating current economic policy like; monetary fiscal policy, reserved ratio and liquidity ratio etc. Therefore conscious effect have been taken made by the monetary authority to generally separate the various controls which formed the basic past economic policies have made worth wide. The system of control on the prices of commodities has since ended and interest rates have been totally deregulated while the market for foreign exchange has been in operation since 1986.    

          The role of the monetary and financial sector in promoting the rapid development of the real sector of the economy cannot be over – emphasized as apse of the economy financial system, the central bank of Nigeria  (CBN) has had to shoulder increasing responsibility in develop not only a sound monetary and financial system but also actively advancing the development objective of the federal government. Therefore, the central bank of Nigeria is a macro institution where activities affecting the nation economic life in the conduct of monetary management.

          However, the commercial bank of Nigeria face same challenges in measure with the required standard of central bank which monetary, credit and fiscal policy. The problem of excess liquidity and excessive expansion of bank credit and inadequate financial infrastructure in the adoption of indirectly approach monetary control.


          Despite the achievement of the central bank of Nigeria (CBN) in the performance of its functions, there are still numerous problems are the asymmetry between monetary and fiscal policies. These problems have rendered them ineffective others are as follows.

1.   The problem of excess liquidity and excessive expansion of bank credit.

2.   Government fiscal operation over which government has no control.

3.   Illegal trafficking in the Nigeria currency which was going on in some foreign countries

4.   Inadequate financial infrastructure in the adoption of indirect monetary approach.

5.   The Nigeria case is further aggravated by the inconsistency of the monetary policy as administered by the central bank of Nigeria


The objective of this study is to make a detail explanation of the effect of monetary policy as an instrument of liquidity of commercial banks in Nigeria. Monetary authority are charged with the responsibilities to administer monetary policies are normally concerned with the selection or some economic objectives, such economic objectives must be such that are in the general interest of the society  

          The economic growth of any monetary policy may include all or any of the following:

1.   The guideline of economic towards optimum growth rate.

2.   The restrains of any tending of the economy towards a chronic balance of payment disequilibrium.

3.   To found out why bank need to be more liquidity than any other business organization

4.   The improvement of the functioning of the economy by restraining demand and inflationary price increase imposing real cost on society.

5.   To identify why Nigeria banks are excessively liquid and at the same time make high profit.

          Nevertheless, monetary authorities are not free to deal with these objectives separately but are required to pursue them simultaneously and this makes their task very difficult. There are economic objectives that can be mutually re-enforcing that the attainment of the others.


The following research questions are vital for elaborate analysis of the study.

1.   How can the policy conflict in the monetary policy be resolved?

2.   Can monetary policy help in the attainment of sustained economic growth in the Nigeria economy?


The significance of this study not only to fulfill the department requirement for the completion of HND programme in banking and finance, but also to focus on the operation of the central bank of Nigeria in the economy policy of the country.

          Moreover the study is significant generally to all banking and finance students and also economist and readers of this study/ work will be expose as regarding the input of future study. The basis of this research work is the position of liquidity of the Nigerian commercial bank as determinant of profitability

          It is hoped that the result obtained from the study will benefit the management and the non – bank financial institution, business enterprise and student of accounting, and other related course.

1.6    SCOPE AND LIMITATION           

           When carrying out this project work, there were several attempts to overcome obstacles and other related weakness that exist with the limited available resources.

          In study of this nature which involve the analysis of the commercial bank statement and qualification of their investment and degree of three liquidity. In such a study, the limitability of the data available and its types obviously limits the extent and scope of the analysis

          On the other hand, since the research work is outside my institution of learning, I made some trips and also lack of some statistical data which posses as a hindrance to obtain an effective research work.


The bank was formally opened as a limited liability company in 1970, the old bank metamorphosed into new Nigeria bank plc in the year 2000 it later changed its name to NNB international bank plc in 2004 with the full conventional services. The bank currently has a number of 36 branches national wide with its corporate headquarters in Lagos.

          The bank has a lot of chief executive before the present CEO /MD (managing director) Mr. Alex Okoh of delta state. Though, the bank went down 1994 – 1998 due to a lot of lapses in the system. It has however bounced back with a lot of repackaged and refocused service, thereby making it one of the best back within the south – south geo – political zone       

          The bank (NNB international bank plc) upon coming back liquidity was forced to close some branches down (some unproductive at that time) notable amongst those branches in delta state are Issele – uku, Orerokpe, Ogwashi – uku and Ozoro.

          NNB international bank is one of the most successful consolidation banks in the on – going CBN (central bank of Nigeria) requirement for minimum capital base. The bank “NNB international plc” has joined forces with “Akiri bank group”

          To meet up the required N25 billion a lot is to be expected in the turn – around of the bank post consolidation as the bank (the group is to stamp its authority in the nation’s economy.


1.   Monetary policy:- monetary policy can be defined as any conscious action undertaken by the monetary authorities to change or regulate the availability, quantity, cost or direction off credit in any economy, in order to obtain stated economic objectives. Nzotta (1999)

2.   Fiscal policy:- fiscal policy can be used for the government expenditure and relevance programmes to affect the economy in such a way as to produce desirable effect on such macro – economic variables as full employment, general price level aggregate demand and economic growth.

3.   Liquidity:-  it is the ability of bank to pay cash immediately when called upon to do so for all of its demand liability or advanced learner’s dictionary define liquidity as the state of owing things of value that can easily be exchanged for cash.

4.   Reserve Ratio:- this is a certain percentage of its total deposit in forms to reserve fund in its vault and also a certain percentage with the central bank

5.   Commercial bank: - this is a bank that offers services to the general public and to companies. It is type of bank that provides services, such as accepting deposits, giving business loans and basic investment products

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