Appraisal of Treasury Management Strategies and Liquidity Risk in Nigerian Commercial Banks

Treasury management is the operational nerve centre of liquidity risk management in commercial banks, and an appraisal of the strategies employed by Nigerian banks offers important insights for professional practice and policy. This study appraises the treasury management strategies and their effectiveness in managing liquidity risk in Nigerian commercial banks. Primary data were collected from 75 treasury managers, asset-liability committee members, and liquidity risk officers across ten commercial banks in Lagos and Kano through structured questionnaires and in-depth interviews. Liquidity risk management effectiveness was measured by liquidity coverage ratio compliance, net stable funding ratio compliance, cash reserve ratio compliance, and frequency of liquidity stress episodes. Treasury strategy variables included interbank borrowing frequency, secondary market government security holdings, and funds transfer pricing mechanism maturity. Descriptive statistics, Pearson correlation, and thematic analysis were used. Results showed a significant positive correlation between active government security portfolio management and liquidity coverage ratio performance (r = 0.67, p < 0.01). Banks employing formal funds transfer pricing mechanisms showed lower intraday liquidity stress frequency. Interbank borrowing as a primary liquidity buffer was associated with elevated rollover risk during market stress periods. The study concludes that Nigerian commercial banks must adopt more sophisticated treasury management frameworks, including formal funds transfer pricing and active liability management, to sustainably manage liquidity risk in an environment of increasing monetary policy volatility. Keywords: treasury management, liquidity risk, liquidity coverage ratio, funds transfer pricing, commercial banks