TREASURY MANAGEMENT STRATEGIES AND CHALLENGES IN THE

BANKING INDUSTRY

ABSTRACT

This research work was conducted to examine Treasury management

strategies and challenges in the Nigeria. Banking industry, identifying the
various types of bank treasury products, their challenges and the strategies
applied by difference banks in marketing their new and existing treasury
products. The study analyses the treasury management responsibilities
assumed by financial departments and develops a model to confirm those
responsibilities. The study has also developed an explanatory model that
brings together the man functions of the treasurer by means of two
concepts: (i) basic cash management, which group the management of
collections and payments, liquidity monitoring in banking operations, short
term treasury forecasts, management of banking balances on value data
and negotiation with financial organisation; and (ii) “advanced cash
management”, which includes the management of the financing of the
positioning of treasury peaks and the management of financial risks.
 TABLE OF CONTENT

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

1.2 STATEMENT OF PROBLEMS

1.3 OBJECTIVE OF THE STUDY

1.4 RESEARCH QUESTION

1.5 STATEMENT OF HYPOTHESIS

1.6 SIGNIFICANCE OF THE STUDY

1.7 SCOPE OF THE STUDY

1.8 LIMITATION OF STUDY

1.9 DEFINITION OF TERMS

CHAPTER TWO

2.0 LITERATURE REVIEW AND THEORETICAL INSIGHT

2.1 INTRODUCTION

2.2 RELEVANCE OF TREASURY AND PROFITABILITY TO NIGERIAN

BANKS

2.3 THE CONCEPT OF TREASURY

2.4 ELEMENTS OF TREASURY

2.5 THE MANAGEMENT OF TREASURY IN COMMERCIAL BANKS

2.6 TREASURY MEASUREMENT IN COMMERCIAL BANKS

2.7 GUIDELINES FOR THE DEVELOPMENT OF TREASURY MANAGEMENT

POLICIES
CHAPTER THREE

3.0 RESEARCH METHODOLOGY AND DESIGN

3.1 RESEARCH DESIGN

3.2 POPULATION OF THE STUDY

3.3 SAMPLE OR SAMPLING TECHNIQUES

3.4 RESEARCH INSTRUMENTS

3.5 DATA COLLECTION PROCEDURE

3.6 DATA ANALYSIS TECHNIQUES

3.6.1 STATISTICAL PROCEDURE

3.7 DATA COLLECTION PROCEDURE

CHAPTER FOUR

4.0 PRESENTATION AND ANALYSIS OF DATA

4.1 INTRODUCTION

4.2 PRESENTATION OF DATA

TEST OF HYPOTESIS

CHAPTER FIVE

5.0 SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 INTRODUCTION

5.2 SUMMARY OF FINDINGS

5.3 CONCLUSION

5.4 RECOMMENDATION

BIBLIOGRAPHY
 CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Treasury function emerged as a result of the sophistication of banks.

After the recapitalisation of banks capital to N25 billion in 31 December,
2005 due to increasing competition, Banks have initiated a lots of product
to enhance their treasury function, knowing that treasury product which is
an important aspect of banking activities especially as Banks operate at the
short end of the financial market known as money market. Indeed treasury
function is a critical tool for controlling Treasury. Interest rate and off
balance-sheet risks, loans deposits, borrowed fund pricing and the
execution of assets and liability management policies.

Management of bank treasury comprises fund acquisition, investment

in marketable securities, hedging and the management of the bank’s
reserve account at the central bank. for a bank to be remain profitable and
also be able to manage their Treasury position, such bank should develop
treasury management strategies needed to compete with other banks in
the industries, they should also develop and market new treasury product
which will enhance their Treasury and profitability position.

Banks when trying to manage its treasure products faced many

challenges which may come from customer when deciding on going to the
other bank that they can understand their treasury product or collect prime
interest rate. Another challenges may be from the regulatory authorities
(CBN) by trying to regulate the Treasury position of commercial bank initial
new policy guidelines which all banks must comply with. These and other
are the are which the researcher will cover in the conduct of this research
work.

1.2 STATEMENT OF PROBLEMS

1. The treasury management and inadequate Treasury has recorded

some initial failure on Banks.

2. The evolve of Union Bank Plc to make phenomenal profit, by making

them to be careless or resources utilization and particularly their treasure
management.

3. The inadequacy for the management strategies holding by banks.

4. The inability of the Union Bank Plc and UBA Bank Plc to fulfil both its
short and long term obligation, it is based on the management of Treasury.

1.3 OBJECTIVE OF THE STUDY

The under-listed point generally make up the objectives of the study,

they are as follows:

a. 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.
b. To find out, it the banks have initiated new strategies in
marketing and management of their treasury products.

c. To find out the challenges encountered by banks in managing

their treasury.

d. To find out how the banks are monitored and supervised on CBN
general policy guidelines.

1.4 RESEARCH QUESTION

The research question for this work is stated below:

1. Can management of bank treasury be a critical tool for controlling

it’s Treasury?

2. Does management of the bank’s reserve account at CBN means

managing the bank’s balances in required reserve account?

3. Can marketing of bank treasury product be an important aspect of

banking activities?

4. Is new products developments the basic funding strategies in

banking?

5. Can management of bank treasury help in economic

development?

1.5 STATEMENT OF HYPOTHESIS

HYPOTHESIS I
Ho: There is no relationship between the commercial bank total assist and
her level of profitability.

HA: There is relationship between the commercial bank total asset and her
level of profitability.

HYPOTHESIS II

Ho: There is no significant relationship between a treasury management

and bank investment.

HA: Thee is significant relationship between a treasury management and

bank investment.

1.6 SIGNIFICANCE OF THE STUDY

Treasury function which is the critical tools used by Banks to manage

their Treasury position, will help the banks to be able to know the new
strategies used by their competitors to manage their treasure products.

It will also help the regulatory authority (CBN) to regulate the

monetary policy thereby enhancing economic development.

Academically, it will be one of the sources through which student and

or researcher would understand the difference forms of treasury, products,
the strategies used by banks to manage their treasury effectively and
efficiently, and also help them to do more research work on management
of bank treasury.

1.7 SCOPE OF THE STUDY

The researcher intends to know how the banking industry

management their treasury function because treasury management which
is know as the critical tool used by banks to management their Treasury
position. By knowing when to invest short, medium or long – term and also
the amount of cash to reserve in their vault.

In carrying out this research work, the researcher will specialize in two
Banks i.e. Union Plc and UBA Plc as areas covered in this research work,
which the finding, conclusion and recommendation will cover the entire
system.

1.8 LIMITATION OF STUDY

One of the major limitation is time constraint since the project is

expected to be completed within a short period of month.

Another limitation is lack of statistical data and literature to review for

the project work financially constraints is also one of the limitations.

Furthermore, because of oath of secrecy sworn by the bank officials

and fear of divulging vital information to their competitors, some staff
members of Union bank and UBA Plc found it difficult to release necessary
information for this work. This did not , in any way affect the validity and
reliability of this project because the researcher painskakingly ensure that
all relevant fact on ground were investigated.

1.9 DEFINITION OF TERMS

1. Analysis: To study in detail by breaking it down into various parts, to

submit s to certain test order to identify its constituents to break up into its
simplest element.

2. Bank: This is a financial institutions that provides banking service.

3. Control: A credit policy package should have in build monitoring

device for comparing the actual result with the policy guidelines. This can
be achieved by specifying a number of commercial returns to be rendered
periodically.

4. Comparative: Having to do with comparison or comparing what is

similar and different in two or more branches of knowledge measured or
judged by company.

5. Hypothesis: This is an assumption, which the person carrying out an

investigation on a particular to made ahead of time, before embarking on
the investigation. The hypothesis could be negative or alternative (positive)
hypothesis.
6. Management: This simply means getting things done through other
people.

7. Policy Guideline: This is the totality of the rules, procedures and

processes, which the management and bank adopts to guide them in their
duties.

8. Target Market: This refers to care customers of the bank.

9. Loan: A loan is a credit facility extended by one party (Lender) to

another party (borrower), subjected to specific terms and condition agreed
to both parties
 CHAPTER TWO

2.0 LITERATURE REVIEW AND THEORETICAL INSIGHT

2.1 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.

2.2 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 toconvert its assets into cash. Short term,

generally, signifies obligations which mature within one accountingyear.

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 ofTreasury.

However, there is no standard norm for Treasury. It depends on the

nature of the business, scale ofoperations, location of the business and

many other factors.Every stakeholder has interest in the Treasury position

of a company. Supplier of goods will check theTreasury of the company

before selling goods on credit. Employees also have interest in the

Treasury toknow whether the company can meet its employees’ related
obligations: salary, pension, provident fundetc. Shareholders are interested

in understanding the Treasury due to its huge impact on the profitability.

Shareholders may not like high Treasury as profitability and Treasury are

inversely related. However,shareholders are also aware that non-Treasury

will deprive the company from getting incentives from thesuppliers,

creditors, and bankers.

2.3 THE CONCEPT OF TREASURY

The concept of Treasury has been a source of worry to the management of

firms of the uncertainty of thefuture.

Treasury is a financial term that means the amount of capital that is

available for investment. Today, mostof this capital is credit, not cash.

That's because the large financial institutions that do most

investmentsprefer using borrowed money.

High Treasury means there is a lot of capital because interest rates are

low, and so capital is easily available.

Why are interest rates so important in controlling Treasury? Because these

rates really dictate how expensive it is to borrow. Low interest rates mean

credit is cheap, so businesses and investors are more likely to borrow. The
return on investment only has to be higher than the interest rate, so more

investments look good. In this way, high Treasury spurs economic growth.

Treasury can be defined as the state or condition of a business

organization which determines its ability to honour or discharge its

maturing obligations.

These maturing obligations are composed of current liabilities and long-

term debts.

Treasury can also be defined as a measure of the relative amount of asset

in cash or which can be quickly converted into cash without any loss in

value available to meet short term liabilities.

Liquid assets are composed of cash and bank balances, debtors and

marketable securities. Treasury is the ability of a firm to meet all

obligations without endangering its financial conditions.

Treasury will help a firm to avoid a situation where a firm will be forced to

liquidate with its attendant problems of selling assets at distressed prices

and the extra fees paid to lawyers, trustees in bankruptcy and liquidators

on liquidation. The definitions above imply that, as Treasury increases, the

probability of technical insolvency is reduced. The definitions above went

ahead to expand the views by recognizing two dimensions of Treasury

namely the time necessary to convert an asset into money and the degree

of certainty associated with the conversion ratio or price realized for the

assets.

2.3.1Treasury Components

_ Vault Cash

_ Balances Held With CBN

_ Balances Held With Other Banks In Nigeria

_ Balances Held With Offices & Branches Outside Nigeria

_ Money At Call In Nigeria

_ Inter-bank Placement

_ Placement with Discount Houses

_ Treasury Bills

_ Treasury Certificates

_ Investment in Stabilization Securities

_ Bills Discounted Payable In Nigeria

_ Negotiable Certificates of Deposits

_ Bankers Acceptances and Commercial Papers

_ Investments In FGN Development Stock

_ Industrial (Other) Investments

2.4 ELEMENTS OF TREASURY

Treasury is a complex concept as the rate of Treasury among different

liquid assets differs. For instance, a savings or time deposit is more liquid

than common stock and common stocks in turn are more liquid than real

estate. Treasury is a relative concept because there is no specific level of

any balance sheet ratio that indicates that the firm is no longer liquid.

Treasury involves three elements or characteristics namely Marketability,

Stability and Conservatism.

Liquid assets should be more marketable or transferable. That means, they

are expected to be converted to cash easily and promptly, and are

redeemed prior to maturity. All assets that cannot be redeemed at maturity

are said to be illiquid.

Another quality of liquid asset is price stability. Based on this characteristic,

bank deposits and short term securities are more liquid than equity

investments such as common stocks and real estates due to the fact that

the prices of the former are fixed and have lesser variability than the prices

and value of the later that experience considerable fluctuation

Conservatism quality of Treasury refers to the ability of the holders of

liquid assets to recover the cost of the asset on the time of resale. On the

basis, common stocks are not considered highly liquid asset despite its

ready marketability. This can be attributed to the fact that on certain

periods, the current prices are lower than their initial or original prices. In

consideration of these qualities, people and firms decide to hold cash which

is the only perfectly liquid asset.

Double coincidence of wants was one of the problems that made trade by

barter unpopular and caused for its replacement with money. For the fact

that all other asset is converted into money before they are used and for

the fact that money ensures that an asset is converted to any other asset,

make money the most popular liquid asset with high rate of convertibility

needed of any liquid asset.

2.5 THE MANAGEMENT OF TREASURY IN COMMERCIAL BANKS

Bank Treasury refers to the ability of the bank to ensure the availability of

finds to meet financial commitments or maturing obligations at a

reasonable price at all times. Put tersely, bank Treasury means a bank

having money where they need it particularly to satisfy the withdrawal

needs of the customers. The survival of commercial banks depends greatly

on how liquid they are since ilTreasury being a sign of imminent distress

can easily erode the confidence of the public in the banking sector and

results to deposit.

Equally important is the need for adequate income through interest on loan

to ensure continued provision of productive resources and survival. It

therefore becomes uneconomic and financially unreasonable for banks to

allow excess idle cash in the vault or excess Treasury.

Hence, a need for effective Treasury management to maximize revenues

while holding risks of insolvency to desired level.

Treasury management refers to the planning and control necessary to

ensure that the organization maintains enough liquid assets either as an

obligation to the customers of the organization so as to meet some

obligations incidental to survival of the business or as a measure to adhere

to the monetary policies of the central bank. For a commercial bank to plan

for or manage its Treasury position, it first manages its money position by

complying with the legal requirement. Actually, management of money

position is essential if a bank must avoid excesses or deficiencies of

required primary reserves. Where there is a decline in market price of

securities or where additional funds needed to correct the bank reserve

position are for a very short time, it will be definitely expensive to sell

securities than to borrow from another bank.

Moreover, it may be more desirable to borrow for bank's Treasury needs

than to call back outstanding loans or to cancel or place embargo on new

loans, a situation that will reduce the existing and potential customers of a

bank. Commercial banks are expected to maintain certain levels of

reserves. These reserves are statutory requirements stipulated by the

central bank specifying the cash reserves equal to certain fraction of the

banks’ deposits or loans and advances which bank must maintain.

Originally, the purpose of the reserve requirement is to compel banks to

maintain a reasonable degree of Treasury in order to be able to meet cash

demands. But currently, these reserves are used as control device through

which the federal government can influence the monetary system.

Most commercial banks in their bid not to contravene the regulation

specifying legal minimum reserve requirement and in order to provide

against unforeseen large withdrawals, resolve to maintain reserves in

excess of their legal requirements. For the fact that keeping excess reserve

for the purpose of short run safety means to forgo income or earnings,

commercial banks need to manage their reserves adequately.

Effective Treasury management therefore involves obtaining full utilization

of all reserves.

The primary reserves composed of vault cash, cash balances or excess

reserves with the CBN, deposits with other banks both locally and aboard.

They are maintained so as to satisfy legal and operational requirements

and so do not yield any income.

The secondary reserves are those assets of the bank that can quickly be

converted into cash on very short notice without risk of loss or material

impairment of the principal sum invested.

Secondary reserves are characterized by short maturity, high credit quality

and high marketability. The primary motive of holding secondary reserves

is Treasury since they are used to meet both anticipated and unanticipated

short term and seasonal cash needs from deposits withdrawals and loan

requests.

Secondary reserve contributes to the attainment of both profitability and

Treasury objectives.

2.6 TREASURY MEASUREMENT IN COMMERCIAL BANKS

Practically, Treasury management in commercial banks is surrounding both

sizes of the prospective needs for Treasury at any giving time and the
availability of sources of Treasury sufficient to meet them (as highlighted in

2.5.2). The importance of accurate Treasury measurement cannot be over

stressed as it reveals the Treasury positions of the banks through which

the operators of the financial market and other creditors adjudged the

credit worthiness of the banks.

Treasury can be measured as a stock or as a flow. From the stock

perspective, Treasury management requires an appraisal of holdings of

assets that may be turned into cash. The determination of Treasury

adequacy within this framework requires a comparison of holding of liquid

assets with expected Treasury needs. Stock concept of Treasury

management has been criticized as being too narrow in scope.

The flow concept of Treasury measurement views Treasury not only as the

ability to convert liquid to assets into cash but also the ability of the

economic units to borrow and generate cash from operators. This approach

recognizes the difficulty involved in determining Treasury standards since

future demands are not known. It also recommends accurate forecast of

cash needs and expected level of Treasury assets and cash receipts over a

given period of time for there to be a realistic appraisal of a bank's

Treasury position.
Between the two concepts, the stock concept is the widely used and

involving the application of financial ratios in the measurement of Treasury

positions of commercial banks. One of the popular financial ratios used in

such measurement is Treasury ratios which measures the ability of the

bank to meet its current obligations. The Treasury ratios are composed of

current ratio and quick ratio.

Current ratio is a measure of a commercial bank's short term solvency and

is calculated by dividing current assets by current liabilities incurred. The

current assets are composed of cash and those assets which can be

converted into cash in a short period which include marketable securities,

receivables, inventories, and prepared expenses. Current liabilities consist

all obligations maturing within a year. They include accounts payable, bills

payable, note payable, accrued expenses and tax liability. A current ratio

that is greater than one is adjudged satisfactory for most business firms

even though it is difficult to authoritatively set one standard for all firms.

The problem associated with the measure of Treasury with current ratio is

that it is the test of quantity and not quality of the assets and hence, it

does not reveal the true position of a firm's Treasury. Current ratio gives

the rough idea of the firm's Treasury.

Another aspect of Treasury ratio is quick ratio, which indicates the

relationship between liquid assets and current liabilities. Quick ratio is

calculated by dividing the quick asset (current asset less inventories) by

current liabilities. The quick assets are the assets that can be converted

into cash immediately without losing their values. Inventories are

subtracted from the current assets because they normally require some

time for realizing cash and their value has a tendency to fluctuate.

Quick ratio is considered to be a better guide to the short-term solvency of

a firm. A quick ratio is considered to represent a satisfactory current

financial condition. However, each industry has its own operating

characteristics which demands different financial standards.

Other ratios which have been developed to measure Treasury are liquid

assets to total assets; liquid assets to total deposits; loans and advances to

deposits. Calculating the ratio of liquid assets to total assets explains the

importance of a bank's liquid assets among its total assets. It indicates the

proportion of a banker's total assets that can be converted into cash at a

short notice. The ratio of liquid assets to total deposits shows what

percentage of a bank's deposits is held in liquid form. It relates liquid

assets directly to deposit level.

The principal limitation of these two ratios is the difficulty in ascertaining

what should be the Treasury characteristics of cyclical secondary reserves.

The ratio of loan and advances to deposits reflects the quantity or

proportion of the customers' deposits that has been given out in form of

loans and the percentage that is retained in the liquid forms. The ratio

serves as a useful planning and control tool in Treasury management since

commercial banks use it as a guide in lending and investment, and to make

a total evaluation of their expansion program. When the ratio rises to a

relatively high level, banks are encouraged to lend and invest and vice

versa, to take some benefit of profitability.

However, the limitation of the ratio is that it fails to indicate the maturity or

quality of the portfolio. It is risky to characterize broad classes of balance

sheet items as more or less liquid than others. Not all assets in any

particular grouping have the same degree of Treasury or maturity".

Another limitation of this ratio is that it measures only assets Treasury and

excludes any measure of the ability of a bank to raise funds other than

through the sale of the assets.

Cash ratio i.e. ratio of cash to total deposits or assets is another measure

of bank Treasury. Its advantage over others is that liquid assets are related
directly to deposits rather than to loans and advances that constitute the

most illiquid of banks assets. Its drawback is that a substantial part of the

cash assets is not really available to meet most Treasury assets.

2.7 GUIDELINES FOR THE DEVELOPMENT OF TREASURY

MANAGEMENT POLICIES

Treasury is crucial to the on-going viability of any bank, as ilTreasury can

have dramatic and rapid adverse effects on even well capitalized banks.

Where a crisis develops in a bank as a result of other problems such as

deterioration in asset quality, the time available to the bank to address the

problem will be determined by its Treasury. Therefore, the measurement

and management of Treasury are amongst the most vital activities of

banks.

The importance of Treasury transcends the individual bank, as a Treasury

shortfall in a single institution can have system-wide repercussions.

Consequently, the analysis of Treasury requires bank’s Managements to

measure, not only the Treasury positions of their banks, on an ongoing

basis, but also to examine how funding requirements are likely to evolve

under crisis scenarios.

In view of the above considerations, a viable framework has been

developed to guide banks’ the management of their Treasury in line with

international standards and best practices.

Banks are, therefore required to develop and implement their Treasury

management policies, in line with the attached guidelines. The policies

should limit Treasury risk to acceptable levels and clearly define managerial

responsibilities for managing Treasury.

These policies and systems are to be observed at all times and further

reviewed from time to time, to reflect changing circumstances.

The Importance of Treasury in Commercial Bank Management

Treasury is a term that measures the availability of cash whether direct or

indirect. It also involves the rate and time of converting some current

assets into cash to meet both ordinary and extra- ordinary demands.

Treasury has been presented by several scholars as a tool for measuring

the bank's bargaining power and strength. One of the popular views of

these scholars concerning Treasury is that the more effective a commercial

bank is in managing its Treasury, the stronger will his position be in the

drive for loanable funds.

Adequate Treasury enables a bank to meet three risks namely: funding risk

(the ability to replace net out flows of funds either through withdrawals of

retail deposits or non-renewal of wholesale funds), Time risk (the ability to

compensate for non receipt inflows of funds if the borrower fails to meet

their commitment at a specific time), lending risk (ability to meet requests

for funds from important customers).

Adequate Treasury helps a commercial bank to meet customers'

withdrawal and or demand for loans. This reduces the possibility of

providing financing under very unfavorable loan agreement restrictions and

at relatively high interest costs.

Treasury management helps a commercial bank to maintain stability in

operations and earnings by serving as a guide to investment portfolio

packaging and management.

Effective Treasury management serves as a veritable tool through which

commercial banks maintain the statutory requirements of the central bank

as it affects the proportion of deposits to liquid assets and deposits to loans

and advances. Treasury management reduces the incidence of bankruptcy

and liquidation/failure which can be the later effect of ilTreasury or

insolvency, and help them to achieve some margin of safety for their

customers deposits. In other words, adequate Treasury helps to generate

and sustain public confidence of the depositors and the financial markets.

If the financial market perceives a bank to have Treasury problems, the

bank may find it difficult to raise further funds except at a premium.

Treasury management assists commercial banks in trading off between risk

and return; and Treasury and profitability. Treasury management also

serves as a tool through which commercial banks avoid over-Treasury and

under-Treasury and their consequences.

It enables the commercial banks to avoid forced sales unfavorable and

unprofitable venture of selling its assets to generate cash and to avoid non

volitional or involuntary borrowing at CBN discount house, a situation that

puts a bank literally at the mercy of the Central Bank.

 CHAPTER THREE

3.0 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:

3.1 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.

3.2 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.

3.3 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.

3.4 RESEARCH INSTRUMENTS

The instrument used in collection of data is questionnaire, which was

administered on the bank staff. Also journals and text books were

consulted, likewise some internet work.

3.5 DATA COLLECTION PROCEDURE

The sampling procedure adopted in this research was simple random

sampling techniques. The aim was to generate responses from the

respondents in the Bank through the research questions contained in the

questionnaire.

The variables of the, sampling includes the Treasury management in

Commercial Banks.
3.6 DATA ANALYSIS TECHNIQUES

The researcher analyzed the data using tables in reporting the results of

the study. Percentages and chi-square (X2) distribution were also applied

as statistical method of analyzing the data.

The techniques used to test the hypothesis is the chi-square (X 2)

distribution techniques because it is a non-parametric test and is concerned

with trying to find out whether there is a relationship between two

variables and also simple to calculate and used when the degree of

freedom (v) is one (v=1) and more than one (v>1).

3.6.1STATISTICAL PROCEDURE

The following steps were used in testing the hypothesis with chi-square

(X2) distribution techniques, statement of the null hypothesis as well as the

alternative hypothesis (HO and H1) statement of alpha and its level of

significance (0.05).

Statement of the formula

X2 = ∑(F0-Fe)2

Fe

Where F0 = The observed frequency of any value

Fe = The expected frequency of any value.

Degree of freedom (.5) is arrived at by the formula:

(R-1) (C-1)

Where R = Row

C = Coloumn

3.7 DATA COLLECTION PROCEDURE

The data was collected from the primary and secondary sources by way of

administering questionnaire to the respondents and consultations of

journals and books . The questionnaires were distributed to 30 Staff of

Union bank. This was carried out during the official working period, i.e

from Monday to Friday till completion of responses to the questionnaire.

 CHAPTER FOUR

4.0 PRESENTATION AND ANALYSIS OF DATA

4.1 INTRODUCTION

The research employed the use of frequency table for presenting and

analyzing data from questionnaire responses.

4.2 PRESENTATION OF DATA

QUESTION 1

Does Treasury have any influence on the performance of commercial

banks?

Option Frequency Percentage

Yes 40 80
No 10 20
Total 50 100
Survey Data 2013

In the table 1: indicates that a large number of respondents agreed with

that fact Treasury influence the performance of commercial banks.

QUESTION 2
Does the new policy posture of monetary authorities help to ameliorate the

Treasury problem?

Option Frequency Percentage

Yes 45 85
No 5 15
Total 50 100
Survey data 2013

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.

QUESTION 3

Do you think that Treasury can actually affect the profitability of a bank?

Option Frequency Percentage

Yes 30 69
No 20 31
Total 50 100
Survey data 2013

Responses to question: three (3) indicate a very good number of

respondents agree that Treasury can actually affect the profitability of a

bank while few disagreed

QUESTION 4

Do you think Treasury affect investor confidence?

Option Frequency Percentage

Yes 30 40
No 20 60
Total 50 100
Survey data 2013

Responses to question (4) indicate that majority of respondent disagreed

to the fact that bank’s Treasury affect investor inference because majority

of the investor operate without loans from the bank so it doesn’t affect

their inference.

QUESTION 5

Does Treasury necessarily affect the investment portfolio performance?

Option Frequency Percentage

Yes 49 90
No 1 10
Total 50 100
Survey data 2013

Responses to question (5) indicates that it can be ascertained that a very

large number of respondents were of the view that Treasury necessary

affect the investment portfolio performance.

QUESTION 6

Do you think bank Treasury affect/lead to bank crisis?

Option Frequency Percentage
Yes 10 10
No 40 90
Total 50 100
Survey data 2013

Responses to question (7) indicates that bank Treasury affect the sect oral

lending because those that own large farms and in other for faster

implementation they get loans from the bank (started Obansanjo’s regime)

and if the bank is not liquid it can grant loan hence the table shows that

majority of respondent agree that bank Treasury can affect the sect oral

lending.

QUESTION 7 Do you think bank Treasury affect sectional lending?

(Agriculture, manufacturing etc)

Option Frequency Percentage

Yes 10 50
No 40 30
Total 50 100
Survey data 2013
QUESTION 8 Does bank’s Treasury affect inflation rate in the economy

through commercial bank lending process?

Option Frequency Percentage

Yes 30 90
No 20 10
Survey data 2013

Responses to question (8) indicates that bank Treasury cause inflation

because if the bank has excess money they tend to grant big loan and that

lead to excess money in the circulation which monetary policy is used to

regulate the rate of inflation hence table (8) shows that the respondent to

bank Treasury causing inflation is high showing that banking Treasury can

cause inflation.

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).

Using table 4 question x2- test of compute.

Do you think Treasury affect investor confidence?

Option Frequency Percentage

Yes 30 40
No 20 60
Total 50 100
The level of significant is represented 00= %5= 005

The degree of freedom (df) = (r-1) (c-1) where

R = no. of rows

C = no. of columns

= (2-1) (2-1) =1

∑ij = Rijci

Where

∑ij = expected frequency

Rji = ceu in row

Ci = ceu in column

n = sample size

∑ij = ∑ri ∑ci = 30X40 = 12

n 100

∑12 = 20X40 = 12

100

∑13 = 10X21 = 2.1

100
∑14 = 30X60 = 18

100

Contingency table

Oij Eiji Oij Eij (oij Eij)2 (oij Eij)2`

20 18.9 1.1 1.21 0.0640
1 12 -7.1 50.41 6.2234
7 2.1 4.9 24.01 11.4333
2 18 1.1 1.21 1.3444
Total 19.0651

X 2 = 19.0651

Degree of freedom (DR) = (r-1) = (C-1) = (2-1) (2-1) =1

X2 =0.051 =3.841 that is critical value

While x2 cal =19.0651 that is chi-square

Since chi-square is greater than critical value the decision will be to reject

Ho. The null hypothesis and accept Hi alternative that is accepting the fact

that monetary tools have an influence on the profit and deposit of

commercial banks.

DECISION RULE

Since chi-square is greater than the critical value, the decision will be to

reject Ho. The null hypothesis and accept Hi, the alternative hypothesis
There is significant relationship between Treasury and profitability of a

commercial Bank.
 CHAPTER FIVE

5.0 SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 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-

quenon for bank profitability.

5.2 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.

5.3 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.

5.4 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.

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