Chapter One — 1.1 Background to the Study

Over the past decade, the relationship between interest rate volatility and bank liquidity position has become a subject of considerable debate among scholars and industry practitioners alike, particularly within the context of Selected Deposit Money Banks in Nigeria where operating conditions differ markedly from more developed markets.

Selected Deposit Money Banks in Nigeria presents a useful setting for examining this relationship precisely because the conditions there — structural, regulatory, and behavioural — differ from those typically assumed in the broader literature, most of which draws on evidence from more developed economies.

1.2 Statement of the Problem

While interest rate volatility is widely discussed in policy and industry circles, empirical evidence on its actual effect on bank liquidity position within Selected Deposit Money Banks in Nigeria remains sparse and, in places, contradictory. This lack of localized, rigorous evidence makes it difficult for decision-makers to know with confidence whether current approaches to interest rate volatility are helping or hindering bank liquidity position — a gap this study sets out to close.

1.3 Objectives of the Study

1. To examine the effect of Interest Rate Volatility on bank liquidity position in Selected Deposit Money Banks in Nigeria.
2. To assess the extent to which interest rate volatility influences bank liquidity position within the study area.
3. To identify the challenges associated with interest rate volatility in relation to bank liquidity position.
4. To recommend strategies for optimizing interest rate volatility in order to improve bank liquidity position.

1.4 Research Questions

1. What is the effect of interest rate volatility on bank liquidity position in Selected Deposit Money Banks in Nigeria?
2. To what extent does interest rate volatility influence bank liquidity position within the study area?
3. What challenges are associated with interest rate volatility in relation to bank liquidity position?
4. What strategies can be adopted to optimize interest rate volatility in order to improve bank liquidity position?

1.5 Significance of the Study

Beyond its academic contribution to the field of finance / banking, this study has practical value for management teams within Selected Deposit Money Banks in Nigeria seeking to understand how interest rate volatility translates into measurable outcomes around bank liquidity position. It is equally useful to students and future researchers looking for a localized empirical reference on this relationship.

1.6 Scope of the Study

In terms of scope, this study confines itself to Selected Deposit Money Banks in Nigeria, focusing specifically on how interest rate volatility relates to bank liquidity position within that setting. Findings are interpreted within these boundaries rather than as universal claims applicable to every organization or market.