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The Role of IFRS in Enhancing Liquidity Risk Management in Nigerian Banks

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Background of the Study
Liquidity risk, the risk that a financial institution cannot meet its short-term financial obligations due to an imbalance between liquid assets and liabilities, is one of the most critical risks facing banks. The implementation of International Financial Reporting Standards (IFRS) in Nigeria has necessitated changes in the way banks report financial information, particularly in terms of liquidity management. IFRS, with its emphasis on fair value accounting, comprehensive disclosures, and transparent reporting, provides a framework for more accurate assessments of a bank’s liquidity position.
In Nigerian banks, IFRS compliance has the potential to enhance liquidity risk management by ensuring that assets and liabilities are reported more accurately and consistently. The standards also provide guidance on liquidity risk disclosures, enabling stakeholders to better understand a bank's liquidity risk profile. This study aims to examine how IFRS adoption has influenced liquidity risk management practices in Nigerian banks, exploring whether these practices have improved as a result of adopting IFRS.

Statement of the Problem
Although IFRS adoption has been implemented in Nigerian banks, the specific impact of these standards on liquidity risk management remains underexplored. This gap is critical, as liquidity risk is one of the most important challenges facing the banking sector. This study seeks to address this gap by examining the role of IFRS in enhancing liquidity risk management in Nigerian banks.

Aim and Objectives of the Study
The aim of this study is to explore the role of IFRS in improving liquidity risk management practices in Nigerian banks. The specific objectives are:

  1. To assess how IFRS adoption has influenced the liquidity reporting practices of Nigerian banks.

  2. To examine the effectiveness of IFRS in enhancing liquidity risk management in Nigerian banks.

  3. To evaluate the relationship between IFRS compliance and the ability of Nigerian banks to manage liquidity risk effectively.

Research Questions

  1. How has IFRS adoption influenced the liquidity reporting practices of Nigerian banks?

  2. In what ways has IFRS enhanced liquidity risk management in Nigerian banks?

  3. What is the relationship between IFRS compliance and liquidity risk management effectiveness in Nigerian banks?

Research Hypotheses

  1. IFRS adoption significantly influences the liquidity reporting practices of Nigerian banks.

  2. IFRS compliance improves liquidity risk management practices in Nigerian banks.

  3. There is a positive relationship between IFRS compliance and the effectiveness of liquidity risk management in Nigerian banks.

Significance of the Study
This study will provide valuable insights into the role of IFRS in enhancing liquidity risk management in Nigerian banks. The findings will help policymakers, regulators, and banking professionals develop better liquidity risk management strategies, ensuring financial stability and compliance with global standards.

Scope and Limitation of the Study
The study focuses on Nigerian banks and their liquidity risk management practices from 2012 to 2025. Limitations include difficulties in obtaining comprehensive data on liquidity risk management practices across all banks and potential differences in the level of compliance across various institutions.

Definition of Terms

  • Liquidity Risk: The risk that a financial institution will be unable to meet its short-term financial obligations due to an imbalance of liquid assets and liabilities.

  • IFRS Compliance: The adherence to International Financial Reporting Standards in financial reporting and risk management practices.

  • Risk Management: The process of identifying, assessing, and mitigating risks in financial institutions.





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