Cash Management Practices and Liquidity Risk in Cooperative Societies in Enugu State

Cooperative societies in Enugu State play a significant role in financial intermediation and member welfare, yet poor cash management practices have frequently resulted in liquidity crises, loan defaults, and the erosion of member savings, highlighting a critical governance failure within the cooperative sector. This study examined the relationship between cash management practices and liquidity risk in registered cooperative societies in Enugu State. The study was grounded in the liquidity preference theory, which explains the demand for liquid assets as a function of precautionary, transactional, and speculative motives. A survey and documentary research design was employed, with a population of 186 cooperative treasurers, auditors, and executive committee members drawn from 25 registered cooperative societies in the state. A sample of 129 respondents was selected using stratified random sampling. A structured questionnaire and cooperative financial statement data served as instruments, and data were analyzed using Pearson correlation and panel ordinary least squares regression. Findings showed that cash budgeting frequency, maintenance of minimum cash reserves, and diversification of liquid assets were negatively and significantly associated with liquidity risk exposure. Poor cash flow forecasting was identified as the most common cash management failure in the sampled societies. The study concluded that weak cash management disciplines significantly heighten liquidity risk in cooperative societies. It was recommended that the Enugu State Cooperative Federation should mandate minimum cash management training for all elected cooperative executives and enforce quarterly liquidity ratio reporting.

Keywords: Cash management, liquidity risk, cooperative societies, liquidity preference theory, Enugu State