Imperatives of Effective Working Capital Management and Profitability in the Banking Industry in Nigeria

Abstract

This study explored the imperatives of effective Working Capital Management (WCM) and Profitability in the banking industry in Nigeria. WCM core variables namely: Short-term Investments; Credits to customers and Account Receivables and Payables were used as proxy. Survey design was adopted and data were collected using questionnaires and analyzed with Pearson Product-Moment Correlation Coefficient (PPMCC) denoted by ‘r’. The findings to an extent counter apriori expectation. Though the values of ‘r’ exhibited positive signs affirming positive relationship, the strength of relationship is on the average. This was affirmed by the values of (r²), especially that of the variable ‘Credits to customers’ which stood low at 0.2229, meaning that the variable explained only 22.29% variation in Profitability. By implications, the results suggest that WCM variables have not yielded sufficient cash flows that could optimize profits. We therefore recommend efficient surveillance of WCM variables in order to reduce instances that lead to funds losses.