Treasury Management Strategies and Challenges in the Banking Industry
CHAPTER ONE
OBJECTIVE OF THE STUDY
The under-listed point generally make up the objectives of the study, they are as follows:
- To investigate the various techniques it treasury management in UBA Plc and Union Bank Plc and also identify peculiar problems in the management of treasury products.
- To find out, it the banks have initiated new strategies in marketing and management of their treasury products.
- To find out the challenges encountered by banks in managing their treasury.
- To find out how the banks are monitored and supervised on CBN general policy guidelines.
CHAPTER TWO
LITERATURE REVIEW AND THEORETICAL INSIGHT
INTRODUCTION
This study reviews related literature on the relationship between Treasury management and commercial banks’ profitability.
This chapter discusses the meaning and importance of Treasury and profitability to Nigerian banks;overview of Nigerian financial system; the role of commercial banks in the eco[nomy; the concept ofTreasury; the concept of profitability; the relationship between Treasury, profitability, the impact of Treasury and working capital on the profitability and performance of quoted companies.
RELEVANCE OF TREASURY AND PROFITABILITY TO NIGERIAN BANKS
Treasury is the ability of a company to meet its short term obligations. It is the ability of the company to convert its assets into cash. Short term, generally, signifies obligations which mature within one accounting year. Short term also reflects the operating cycle: buying, manufacturing, selling, and collecting. A company that cannot pay its creditors on time and continue to fail its obligations to the suppliers of credit, services, and goods can be declared a sick company or bankrupt company. Inability to meet the short term liabilities may affect the company’s operations and in many cases it may affect its reputation too. Lack of cash or liquid assets on hand may force a company to miss the incentives given by the suppliers of credit, services, and goods. Loss of such incentives may result in higher cost of goods which in turn affect the profitability of the business. So there is always a need for the company to maintain certain degree of Treasury.
However, there is no standard norm for Treasury. It depends on the nature of the business, scale of operations, location of the business and many other factors. Every stakeholder has interest in the Treasury position of a company. Supplier of goods will check the Treasury of the company before selling goods on credit. Employees also have interest in the Treasury to know whether the company can meet its employees’ related obligations: salary, pension, provident fund etc. Shareholders are interested in understanding the Treasury due to its huge impact on the profitability.
CHAPTER THREE
RESEARCH METHODOLOGY AND DESIGN
The methods intended for use in collecting and analyzing data collected from the field in order to test the hypothesis are highlighted in this chapter to make, it has been divided into sub-heads such as:
RESEARCH DESIGN
For efficient and effective results to be realized, the researcher adopted survey method in carrying out the research which incorporates or involves personal interview, questionnaire, observation, telephone interview etc.
POPULATION OF THE STUDY
The target populations for this study are the staff of Union bank Owerri. These were the people sampled in other to get the necessary data needed for the work or Research purpose.
SAMPLE OR SAMPLING TECHNIQUES
The sampling procedure used for this research is simple random sampling which is one of the major methods of probability sampling. In this method, the members of the population are drawn at random to obtain a representative population. The researcher considered that in applying a random sampling, every members of the target population has equal chance of being selected. The sample is limited to only one branch so as to generate quick and acceptable result, cost reduction, thoroughness and effective control and supervision attainment. The sample size of the population is 40, 20 bank staff and 20 bank staff and 20 bank customers.
CHAPTER FOUR
PRESENTATION AND ANALYSIS OF DATA
INTRODUCTION
The research employed the use of frequency table for presenting and analyzing data from questionnaire responses.
Responses to question (two) 2: indicates that 85% of e the respondents agree that the new policy posture of sp authority help to ameliorate the Treasury problem while 15% disagreed.
TEST OF HYPOTESIS
H0: There is no significant relationship between Treasury and profitability of a commercial Bank. (Null Hypothesis)
H1: There is significant relationship between Treasury and profitability of a commercial Bank (Alternate Hypothesis).
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
INTRODUCTION
The need for Treasury management arises from the inevitable mismatch which emanate from the risk inherent in bank borrowing short and lending long. In a simple term; adequate Treasury management is to meet every financial commitment.
To achieve adequate Treasury was at one time a matter or selling short term assets but many big banks, prominence is given to managing the maturity structure and finding needs.
It is apparent that adequate Treasury and it proper management is a sine-qua non for bank profitability.
SUMMARY OF FINDINGS
Adequate Treasury enable banks to mandate it risk and thereby helping to sustain public confidence in the operation of the banking institution which in turn leads to more patronage consequently, more profit
Also, there is the objective of analyzing the problem associated with Treasury management to determine respective ways of solving such problems thereby enhancing a profit making of a bank.
A literature review was carried out in the below chapter of the study to examine related factors to study such as historical background, conceptual frameworks, review of variables etc.
The review of current models and theories was meant to describe management as it is, and also to generate predication of forecast out possible direction or trend of economic problem including Treasury management.
The next chapter which was devoted to the methodology used for the researcher was discussed including; collection processing and analyzing of data were used to support hypothesis postulated the analysis of findings, which is contained in the fourth chapter. The asset and Treasury structures of some commercial banks were examined and the various observations were enumerated in this chapter.
Union bank was considered in the observation Treasury profile of this bank in relation to their asset portfolios were also highlighted since the form an integral part of the analysis of the study.
CONCLUSION
For effective Treasury management for the attainment of maximum profitability, It is therefore important that commercial banks should obtain utilization of all reserves holding the minimum of such resources in non-earning assets, considering the Treasury and reserves need in a competition and uncertainty environment. By so doing, the would not only be keeping their Treasury position in check but also increasing their potentialities.
Conclusively, the study has been able to establish the role of Treasury management in the attainment of maximum profitability is indispensable of any bank that does not place premium on this role will have witnessed earlier on the study.
RECOMMENDATION
The Treasury of a bank is therefore a function of the amount of funds the bank can raise in a certain time and at specific cost. In the same vein, the sooner a bank can raise a given amount of funds in a certain period of time the more liquid it is.
For effective and dynamic Treasury management the following recommendations are required for implementation.
(1) A bank must make sure to meet up with the permissible range.
(2) In managing Treasury, banks also has to take into consideration local and national factors such as the type, sources and stability of deposit which are primary factors for the local level. The social political and economic level of development should be considered.
(3) Moreover, banks should consider the structure of it liabilities and the structure of structure of economic influences, the extent of diversification of the economy influences, the extent of diversification and security of various deposit sources. The more diversified the economy, the more diversity their service and structure of deposits, the more stable they are, the higher the demand deposit, the greater the Treasury need and vice verse.
(4) Monetary policy should be designed to stimulate growth in the banking industry. The upward review of minimum paid up capital to 25 billion has led some banks to encounter Treasury crisis. So Treasury ratio of bank should not be over regulated to avoid complete collapse of the banking system.
(5) Government should take caution of the indiscriminate use of deficit financing to ameliorate the problem of Treasury control. It is pertinent that banks adhere to the various recommendations highlighted above to ensure their maximization of their profitability.
REFERENCES
- Bickjkman, A., And Ronald, S. (1989). Credit and Collection Principles and Practice. U.S.A: Mcgraw Hill Publishers.
- Brown C.U. (1925). The Nigerian Banking System London. U.S.A: Cambridge University Press.
- Central Bank of Nigeria (1976). Annual Report and Statement of Account For The Year Ended.
- David,.B. (1991). Economics. U.S.A: Mcgraw Hill Book Publishers.
- Ethinger, R.,& Golied, O. (1979). Credit and Collection. New York: Prentice Hall Publishers
- Fisher, D. (1976). Monetary Economics. U.S.A: Macmillan Publishers
- Nwankwo G.O. (1991) Bank Management Principles and Practices. Lagos: Malthouse Press
- Ngwu, T.C. (2006). Bank Management. Owerri: Bob Publishers.