Cashflow Management and the Performance of Commercial Banks in Nigeria

Abstract

This study examined the effect of cash flow management on the performance of commercial banks in Nigeria, using secondary data from the Nigerian Exchange Group and the annual reports of fifteen listed banks over the period 2018–2023. The study adopts an ex-post facto research design and employs the Fixed Effect Model of the Panel Least Squares Regression after conducting the Hausman test for model selection. Cash flow management was assessed through three key components: operating cash flow, financing cash flow, and investing cash flow, while bank performance was measured using return on assets (ROA). The findings reveal that operating cash flow has a negative but significant effect on ROA, indicating inefficiencies in operational liquidity management. Financing cash flow exerts a positive but statistically insignificant influence on ROA, suggesting that while external funding may support asset growth, it does not strongly translate into profitability. Investing cash flow also shows a negative and insignificant effect on ROA, pointing to suboptimal capital allocation in investment activities. The study concludes that overall cash flow management significantly influences bank performance. The study recommends the need for Nigerian banks to enhance operational efficiency, adopt strategic financing approaches, and implement prudent investment strategies to drive financial performance.