CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Banking is a very important part of business development.

Banking in economic concept is the process of intermediary. A

bank is an intermediary between two people. These are people

with surplus funds without immediate use of that money and

people with business opportunities with adequate resources to

finance such business opportunities. A bank is the avenue through

which these two categories of people are brought to exchange

resources usually in form of money.

The money in banking system is fund belonging to the

people that are kept in trust in the bank for them. They have the

responsibility that whenever owners of the money kept in the bank

are in need of their money in the bank, the money will be made

available.

The bank should ensure the agreement reached on interest

with the customer. The bank trade reasonably with money to

ensure that income is generated to pay the owner of the funds.

The banking industry solved the problem of carrying liquid cash to

1
 carrying cards to minimize the risk of carrying money. Basically,

banking activities revolves around cash.

This means that basic services are in cash that is why

whenever you are in bank office, the basic feature you see with

the cashiers in the cage, one is receiving from customers, other is

paying cash to customers. These cashiers are under the

supervision of the officer designated to such roles.

Cash management are bank differ from the other bank but

their aims to toward profit making. When receiving in trust is of

great importance to note that this provision of this securities to

cash items, provision of cash you demand and ability to keep this

cash and transact with it to yield interest to the bank and pay

customers as well.

At the end of it, it realized the total profit. The realized by

the selected bank of Nigeria Plc. Under the supervision of the staff

known as branch cash officer.

1.2 Statement of the Problem

The basis for a good and efficient management and control

of movement of cash in the banking industry depend on how

customers are rendered with effective services so that they can

derive adequate satisfaction from these banking services. This is

2
 because customer are termed as the valuable assets of the banks

and therefore needed to be treated with due care skill.

More so, one of the greatest function of the bank is to grant

loan to its customer to assist in undertaking their business/project.

The customers on their own part are expected to be honest and

trustworthy in case the loan is granted to them, they should abide

by the term and conditions agreed upon. However, there have

been the cases of cash mismanagement in Nigeria Banking

Industry which have hindered the control mechanism in the

industry. This is as a result of non-compliance with the central

bank of Nigeria guidelines by mist managers, incompetence of

some employees, sharp practices.

Thus for then bank to operate without proper control in their

management of cash could lead to loss of customer and even

result to its mobility to meet up with the central banks regulation

on deposit and cash reserve.

1.3 Objectives of the Study

The main objective of this research work is to evaluate the

effectiveness of cash management and control in banking industry.

Other objectives include.

3
 1. To examine the impact of cash management on firms

profitability

2. To ascertain the impact of information communication

technology on cash management.

3. To evaluate the relevance of cash management and control to

the banking industry

1.4 Research Questions

The following research questions were asked

i. Has cash management any significant impact on firms productivity

ii. Has information technology any significant impact on cash

management.

iii. Has cash management and control any relevance in banking

industry.

1.5 Research Hypothesis

Hypothesis I

Ho: Cash management has no significant impact on firm’s

productivity

Hi: Cash management has significant impact on firm’s productivity

Hypothesis II

Ho: Information technology has no significant impact on cash

management
4
 Hi: Information technology no significant impact on cash

management

Hypothesis III

Ho: Cash management and control has no significant relevance on

banking industries

Hi: Cash management and control has significant relevance on

banking industries

1.6 Scope of the Study

The scope of this study to restricted bank of Nigeria Plc. This

research work will be restricted to the evaluation of the

effectiveness of cash management. The work centres on with

operation in relation to only one sector of the bank which is the

commercial bank.

1.7 Significance of the Study

The study is of great significance because it enlightens the

user with banking information student and the banking practitioner

alike on the evaluation of the effectiveness of cash management

as means of control in banking industry.

The justification of this research work is to bring out the

ways in which cash is operated its profitability to this bank and the

users of the bank as well student alike.

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1.8 Limitations of the Study

In undertaking this research work the researcher limits

himself with the subject matter of this research, which is a study

of selected banks in Lokoja. Much comparison were not made with

the other activities of the commercial bank in the local government

areas due to the little time the researcher have and could visit

other banks for comparison of the activities with one another.

Little attention is paid to the researcher because of the little staff

they have and busy at the sometime many data was not obtained

by the bank because of what is called security reasons guiding the

secret of the bank.

1.9 Definition of Key Terms

Savings Account: The account is operated with the aid of

depositing booklet and booklets for withdrawals of the account or

the balance. The interest is charged in favour of the account

holder and is only reflected on the daily report of the savings

department. There is a restriction on the withdrawals.

Current Account: It is that account in which payment and

receipt could be effected by use of cheque. It allows the holder to

withdraw as much as he can or as many times as he desires

because the bank will charge him interest in the withdrawal made
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about five naira on every one thousand naira withdrawn, it is

called commission on turnover (COT).

Cheque: It is a bill of exchange drawn on a banker, payable on

demand to a named person or to a bearer.

Bill of Exchange: It is an unconditional order in writing by one

person to another signed by the person giving it, requiring the

person whom it is addressed to pay on demand or at a

determinable future time a sum certain in money to the order of a

specified or to the bearer.

Certified Cheque: It is a cheque issued by the bank to a

customer on demand. It has a word “certified” on the face with

the date, amount and signature of the bank officials. This cheque

is payable to the cheque and it is only payable within the state.

Traveler Cheque: A cheque designed for travelers or person on

vocation trips. The person wishing to purchase travelers cheque

must have an account with the bank and before they are

delivered, the customer must sign on the face in front of the bank

official. The use of these cheques protects the customers form the

risk of loss, which might result form carrying large sum of currency

when traveling.

7
Draft: It is just a written order to a bank to pay money to

somebody payment must be made by bank draft. Draft is obtained

when collection will be made outside the state.

Dormant account: An account which is not active or has not

been operating for a period of three years is known as “dormant

account” when account is made dormant, no interest will be paid

(in case of saving account) not until reactivation with a reaction.

Overdraft: This is where a banker pays a customer who has no

sufficient fund account. When this is created, the account ceases

to become a deposit but a liability asset.

Loan: This is a system of borrowing money from the bank

whether on short term or long term basis. It also attracts interest

which varies with the decision of the management. This system of

credit can either be on installment repayment.

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 CHAPTER TWO

LITERATURE REVIEW

2.1 Conceptual Framework

Cash management refers to planning, controlling and

accounting for cash transaction and cash balance cash moves

between bank account and other financial assets. Cash

management of all financial resources. Efficient management of

these resources is essential to the success and survival of every

business organization.

Rogers (1995) describes cash management as the process of

ensuring that sufficient cash is available on daily basis to meet

commitment and that the authority operates with it cash limit.

He further stated that it is the process whereby the impact

to the change on cash flow is established

A strategy is developed to manage the risk

Cash flow performance is monitored

Corrective action is taken when performance differs from plan.

Cash management is directed to striking a balance between having

excess cash on the bank which idle unproductive capital a return

and have to little cash which can cripple good project.

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2.1.1Major Department of the Bank

These department of the bank helps to maintain adequate control

and efficient management of funds.

They are:

i. Saving Account Department

ii. Current Account Department

iii. Entries Department

iv. Treasury

v. Advances and Loan Department

Saving Account Department: This is one of the major

department in the bank. An individual or group of individuals can

operate it. All transactions in this department is purely cash

transaction. Control is maintained in this department by laid down

procedures following as well as the daily balancing behavior of the

departments

 Opening of account

 Paying of debts

 Interest payment

Current Account Department: This department perform great

function to customers. In order to have effective control and

efficient management of cash, this department is in bank of:

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  Opening of account

 Receiving cheques

 Payment of cheques

 Stopping of cheques

 Checking balances

 Sales of cheque

 Issue statement of accounts

Entries Department: This department is one of the sensitive

department in the bank. It deals with fund coming into the bank

and going out of it. Other duties are:

 Special clearing

 Issuance of certified cheques

 Standing orders

 Receipt of salaries

Treasury Department: This is a sensitive department in the

bank. It is a place where cash lodges by customers and all

valuables are taken care of. The department consists of a cashier.

The department is on “dual control” which two person holding the

key each which must be signed when collected. A register is kept

11
 in the treasury that show the total of each denomination of notes

and the grand total contained in the bank.

Loans and Advances Department: Loans and advance are

made up of overdrawn current accounts (overdrafts) different

loans to customers and also the staff. Before granted a loan

securities must be obtained by the bank, which will cover the loan

intended.

When the bank is satisfied with the documents then the

management will approve. When a loan is given current account

ledger is raised as loan account. The bank will arrange with

customer of staff on how the loan will be paid back. If this

agreement is reached then the standing order with be raise to

credit the loan account from customers’ personal account. In case

of staff, various loans are car and other special loans.

2.1.2Management and Control of Cash in Banks

In the work of Horngren (1992) bank came into existence

through the funds collected from the share holder and other

parties of the banks. This is the first stage of macement of money

into a banking industry over years. Bank have means of managing

the cash at there disposal, money that cause in so thee banks are

utilized in several ways.

12
 According to Spiro (1997) cash management is seem as a

reflection in attainment of higher level of service of the resource

provided to this organization than world be possible with poor or

mediocre. He further stated that cash management will reflect

indirectly in high project and better levels of service than other

wise obtainable.

For cash management to be justify, the amount needed for

normal operation will depend on the varieties of factor such as

credit position of banks, status of bank receivable, inventory

account, nature of the business and management attitude toward

risk.

2.1.3Cash Management Techniques

Dual Control Cash Management System

According to Argent (1970) dual control cash management in

a banking deal with strong room where two person holding key

each which most be sign for one collected strong room is where all

cash and valuable brought into bank and kept. Control items such

as cheques, books and draft mail transfer is also kept.

Investment of Surplus Cash in Higher Return Yielding

Asset

13
 According to Osaze (1987) there include Treasury bill.

Treasury certificate, loans, overdraft and advances etc.

Treasury bill: It was issued by the central bank of Nigeria on

behalf of the federal government in April 1960 follow the

enactment of treasury bill ordinance 0f 1959. They are form of

shorten credit instrument. Issue to the government for the

purpose of financing its operation and programmed interior unit.

Treasury certificate: This is similar in all aspect with Treasury

bill expect for maturity and discount rate. The in introduction of

treasury bill into stipulated short term finance what money borrow

by federal government by way if treasury certificate must be paid

or measure between one to two years. The rate of treasury

certificate to higher than that of Treasury bill.

Loan: Loan is granted of credit trendy person. Loan could be short

term loan or long term loan. This will assist the borrowers carry on

the project spending for investment, through appropriate

investment multiply in economy increase over time as result

investment prospect embark upon through bank funds.

Bank credit: Bank credit gives rise to the demand deposit which

constitute significance.

14
 Proposition of Nigeria supply indicating the value of the

country currency. It was generally accepted to all sectors of the

economy (manufactory, industry, agriculture and education etc) of

the cheapest rate and the most convenient and efficiencies source

of credit. There are three principles bank leading these are (1)

safety (2) suitability (3) profitability.

Overdraft: Overdraft is an advance sum of money, usually limited

by upper ceiling together with interest. It represent excess margin,

customer is allowed to overdraw his account. Overdraft is a short

term non-specify and normal made available to meet trade

requirement.

Advance: Advance it temporal self-liquidating banking facility

made under certain circumstance spending the receipts or

collection of trade debts community refer to as bridging advance.

2.1.4Management and Control of Cash Selected Banks

According to Egbabor (2000) cash management are normally

sanitized such as the cashier are under the supervision of the staff

known as branch cash offices.

Branch cash office supervises all cashiers. Cashier have the

daily tolls for operation such as tools stationary, the system which

15
is in the computer, they are used in posting up to dating the

customers accounts.

The cash branch office supervised the cashier book so as

that the balance agrees with general ledger and also to ensure

that cash requirement are met with bank. Area officer work under

the area office sometime collect figure both balance form the

respective branches that re under the area. The cash officer

collects the whole balance form the branch and distributes the

money.

There equally arrange funds to move from one area to another.

There is a minimum balance that must be kept by the bank

in its local cash reserves. Local cash is a strong room where

customer’s cash are kept with other valuable items.

This arrangement could be made to evaluate them in the

control central banks branch closest to the bank.

In cash carrying to the bank, the bullion van is the vehicle that is

used with the escort and their van to the location it intends to

reach. This is to ensure the safeguard of the cash form lost or

robbery from the security command.

It is important that cash officer will be aware of the latest

development in the society and should be current with the

16
 publication about security and techniques being used by robbers

to fight the activities of bank.

2.1.5Electronic Cash Management (Electronic Funds Transfer)

According to Spiro (1970) they delay in payment of cash to

customers are being reduce through the use of technique of

electronic funds transfer a system in which funds use moved

between computer terminal with out the use of “check” financial

manager can check all the company bank account through an

online computer terming. The excess of cash balance can be

transferred to another branch or regional bank to the corporate

lead have for over light investment in money market securities.

THE RECEIVE CASHIER

According Awao (1987) the receiving cashier receives total

cash lodgment for the day irrespective of numbers of customers

that come to the bank. He attend to them by rearing their money

and records in their book and balance their own register on daily

basis receiving cashier must ensure that deposit slips are delay

stamped and numbered by the cashier before lodgment. This

serves as check and balance. This will assist the cash officer in
17
 checking the error that will lead to cash shortage will be easily

avoided for all third party payment fifty thousand and above.

The photocopy of the identified that is, identification of

payee must retained by the paying cashier in addition, particular of

the means of the identify must be written at the back of the

instrument in no account pay cashier will not pay more than

N50,000 in his/her cash without the consent of the cash officer or

any other under signed officer.

All cashiers must under sign after the call over team for final

verification has carried out verification. There are cash

management functions by the cash officer supervision on the

terminal operator cashier debt cheques and fail to record the

receipt.

2.1.6 Objectives of Cash Management

According to Agene (1995) the basic objective of cash

management is the maintenance of the sufficient amount by the

bank to meet up the deposit withdrawal and make a profit.

1. To maximize profitability

2. Anticipate the need for borrowing and ensure the availability of

funds/cash to conduct business operation.

3. To eliminate loss from fraud or theft

18
 4. To provide efficiencies services to meet customers needs

5. Prevent unnecessary large amount of money from sitting idle in

bank accounts which generate on revenue.

2.1.7 Evaluation of the Effectiveness of Cash Management

In the words of Fale (1995) stated that lack of sufficient

competent staff to run the account departments where someone

who study agricultural science or English law is employed in the

bank and is assigned to work on entries department where there is

no division of labour of segregation of duties in a situation there

are in engage in more than one work.

The internal control system will be weak in carrying thr

operation of the bank.

Embezzlement: It is the act appropriately fraudulently for ones

use.

Deflation: It is the act of embezzlement due to no-segregation of

duties the area where this deflation could occur is where the

system supervision or the terminal operator cashes a debts cheque

and fails to record the receipt.

2.1.8 Effect of Cash Management

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 Despite the problem of cash management listed above, there

are still prominent hopes for future depend on management of

cash by the selected banks. For instance according to Spiro (1997)

cash management is seen as a reflection in the attainment of high

level of service of resources provided by an organization than will

be possible with poor. He further stated that cash management

will justify the amount needed for normal operations will depend

on varieties of factors such as:

 Management of risk so that the bank will not face the problem of

liquidation

 Competent staff should be employed to run department

 The bank should constituted or maintain internal system in order

to ensure.

 Segregation of duties

 Proper record keeping

 Customers should be educated on the activities of the bank.

 Cash officer/area office should summaries at the area regional

level to review from time procedure of the teller.

2.1.9The Organizational Graph Selected Bank Financial Control

and Management Services

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 By Hanson (1974) the group is made up of controller officer

and other support unit like human resources, corporate affairs unit

and general administration. The unit assists in the smooth

operation of bank activities.

The offices of the controller comprises of the chief

accountants officers trade finance, central clearing, CBN clearing,

management information system (MS), reconciliation and

accounting system unit. The department is responsible for

initiating and implementing well-defined operational procedures for

the bank. All returns form branches are sent to this office. It is

responsible to collect reports produce final account for the bank

and other regulating bodies.

The corporate unit is responsible for corporate image

management of the bank it is done through the activities like

advertisement. Media and public relation even to management.

The general administration unit is responsible for the

procurement and repair and maintenance of the bank. The human

resources unit is responsible for recruitment of personal in the

bank; it is also in charge of all the staff welfare and training

programme. Generally the financial control and management

services are essentially on non-profit making center. It is control

21
 management support service administration responsibility for the

efficient professional banking service in Nigeria.

BOARD OF
ORGANIZATION STRUCTUE OF BANK
DIRECTOR/CHAIRMAN

MANAGING DIRECTOR
/CHIEF EXECUTIVE

DEPUTY MANAGING
DIRECTOR

EXECUTIVE EXECUTIVE EXECUTIVE COMPANY INSPECTION

DIRECTOR DIRECTOR DIRECTOR SECRETARY DEPARTMENT
FINANCE ADMIN OPERATION AND LEGAL
DEPARTMENT

AREA
EXECUTIVE ACCOUNT OFFICE
DIRECTOR DEPARTMENT
FINANCE

22
PERSONEL BRANCH BRANCH
DEPARTMENT
 RISK AND QUALITY MANAGEMENT

According to Osaze (1987) this group is responsible for the

or in charge of prudent management and control of bank credits

risk asset. The group is subdivided into three main units

 Prudent and loan quality units, which ensure that credut request

ate thoroughly reviewed. If the condition stipulated the grant the

loan is met, then the acceptance criteria will be finally approved.

 Documentation unit: this unit is in charge of ensuring that the

approved loans are in line with the term and condition governing

such loan.

BRANCH MANAGEMENT GROUP

According to Agene (1995) this group the strategic plans are

often reviewed due to the internal and external environmental

changes such ass economic, competition and regulations.

23
 INFORMATION SYSTEM AND ELECTRONIC BANKING

According to James (2004) the banks have their commitment

of improving communication, they added more customers in the

remote banking scheme where customers in the conveniences of

their offices are able to view their balances and print their

statements. Within the bank head offices and subsequently all

their branches worldwide. This has enabled the staff to be up-to-

date information on the internal e-mail services to all relevant

staff.

2.2 Empirical Review

As Nyabwanga (2011) asserts, cash management is the

process of planning and controlling cash flows into and out of the

business, cash flows within the business, and cash balances held

by a business at a point in time (as cited in Pandey, 2004). As

Nyabwanga (2011) asserts, efficient cash management involves

the determination of the optimal cash to hold by considering the

trade-off between the opportunity cost of holding too much cash

and the trading cost of holding too little (as cited in Ross et al.,

2008) and as stressed by (as cited in Atrill, 2006), there is need

for careful planning and monitoring of cash flows over time so as

to determine the optimal cash to hold. A study by (Kwame, 2007)

24
established that the setting up of a cash balance policy ensures

prudent cash budgeting and investment of surplus cash. This

finding agree with the findings by (Kotut, 2003) who established

that cash budgeting is useful in planning for shortage and surplus

of cash and has an effect on the financial performance of the

firms. The assertion by (Ross et al., 2008) that reducing the time

cash is tied up in the operating cycle improves a business’s

profitability and market value furthers the significance of efficient

cash management practices in improving business performance.

Erkki (2004) defined cash management as a part of treasury

management , which is defined as a part of the main

responsibilities of the central finance management team(as cited in

Tiegen, 2001) . Huseyin (2011) asserts, the specific task of a

typical treasury function include cash management, risk

management, hedging and insurance management, account

receivable management, account payable management, bank

relations and investor relations (as cited in Kytönen, 2004).

(Huseyin, 2011) thinks that this definition is consistent with the (as

cited in Srinvasan & Kim, 1986) classification of cash management

areas as cash balance management, cash gathering, cash

mobilization and concentration, cash disbursement, and banking

25
system design. Cash balance management includes management

of cash position, short-term borrowing, short term investing, cash

forecasting. (Huseyin, 2011) opinion is that the classifications of

Tiegen’s cash management and Srinvasan and Kim’s cash balance

management are closely related concepts. (Huseyin, 2011)

classifies cash management as operating transactions and financial

transactions. The operating transactions include accounting

ledgers, invoicing , terms of sales - cash collection, cash control

and processing, cash forecasting. The financial transactions

include optimization of cash, short-term investments, short term

borrowing, interest rate risk management, exchange rate risk

management , payment systems, information systems and banking

investor relations (as cited in Kytönen, 2004).

As Jared (2013) asserts, the cooperative form is therefore

regarded as having enormous potential for delivering pro-poor

growth that is owned and controlled by poor people themselves.

Nevertheless it is recognized that, lacking in capital and business

management capacity, cooperatives have had a rather

disappointing history in developing countries (as cited in Birchall,

2004). There is an argument then that it is the broader

characteristics of cooperative organization such as social

26
ownership, people-centred objectives and their community base,

rather than their precise organisational form should be advocated.

According to (Mwaura, 2010) industry statistics in Kenya show that

an estimated 60 SACCOs are way below the required minimum

capital levels –– and are expected to turn to the members for

money needed to reach the threshold. Contributing money for the

capital build-up will force members to take a portion of their

monthly take-home or forego annual dividends in the next four

years in support of the initiative. Nation staff SACCO has, for

example, asked its members to increase their share capital to Sh

6,000 from the current Sh1, 000 in the next five months beginning

August 2010.

As observed by (Steve, 2010) Maisha Bora SACCO had

withheld part or whole dividends for the year 2009 and

encouraged members to invest in beefing up the core capital in

order to meet the SACCO liquidity demands. (Haileselasie, 2003) in

his study about cooperatives in Saesi-Tsaeda-Imba, investigated

that 78.7 percent of the members became member in cooperatives

through mobilization and persuasion by the civil societies such as

Farmers, Youth and Women’s Associations. As a result, the

members’ were not aware of the duties and rights they have in the
27
cooperative societies. According to Haileselasie’s finding, for

example, out of the total respondents members’ participation in

the annual meeting was 12.2 per cent and 68.8 per cent of the

total respondents had bought only one share. The result of the

study revealed that the overall participation of members in co-

operatives was weak (Haileselasie, 2003).

As Darek (2012) asserts, the problem of access to capital

becomes even more challenging in emerging markets for a variety

of reasons (as cited in Benedict and Venter, 2010; Cunningham

and Rowley, 2010; Klonowski, 2005; Abor and Biekpe, 2006;

Tagoeet al., 2005). First, firms in emerging markets operate in an

environment of imperfect legal infrastructure (as cited in

Cunningham and Rowley, 2010; Klonowski, 2005). Capital

providers must often agree to contractual terms that are

suboptimal for them. Second, financial disclosure in emerging

markets continues to be relatively poor (as cited in Sami and Zhou,

2008; Zhou, 2007; Klonowski, 2007). As Darek (2012) asserts,

many countries report financial results under their own financial

standards and regulations, which are different from those seen in

international accounting standards; consequently, auditing firms

must often recast the financial statements of firms operating in

28
such markets. Third, asymmetry of information and moral hazards

are more pronounced in emerging markets (as cited in Klonowski,

2007; Tagoeet al., 2005). Access to information is a greater

challenge to obtain, as sources of information on firms, the

competitive posture of market players, and market size and

growth rates are more difficult to find (as cited in Abor and Biekpe,

2006; Tagoeet al., 2005). Fourth, firms operating within emerging

markets have more problems related to corporate governance.

The corporate governance concerns are more severe and more

difficult to address than those experienced by firms in developed

economies (as cited in Black et al., 2010; Klonowski and

Golebiowska-Tataj, 2009; Parisiet al., 2009; Klonowski, 2007). Key

issues may include the personal use of a firm’s assets,

unaccounted cash withdrawals, appointment of family members,

and so on.

(Ondieki, 2011) in “The effects of external financing on the

performance of SACCOs in Kisii District” observed that major

challenges inherent in the cooperative movement in Kenya

included: poor governance, limited transparency in management

of cooperatives, weak capital base and infrastructure weakness

including ICT. The same opinion is shared by (Karim, 2012)

29
“African SACCO Regulatory framework” whereby it was observed

that leadership or governance of a CFI determines to a large

extent how the CFI responds to regulatory issues and how it

operates within the regulatory framework. This requires that the

BOD members file personal information return with the regulators.

Odhiambo, s(2013) in his study on the relationship between

working capital management and financial performance of deposit

taking savings and credit co-operative societies licensed by SACCO

societies regulatory authority in Nairobi county. Interest rate on

members’ deposits as measure of financial performance was used

as the dependent variable. The independent variable (working

capital management) was measured by cash conversion cycle,

current ratio, debt ratio and turnover growth. The findings

indicated that efficient working capital management leads to better

financial performance of a SACCO, hence a positive relationship

existed between efficient working capital management and

financial performance variable.

A study on the role of financial management practices in the

performance of public service vehicle savings and credit co-

operative societies in Kenya was done by (Kinyua, 2013). The

objectives of this study were to, describe the profile of P.S.V

30
SACCOs, investigate the role of financial management practices in

the P.S.V SACCOs in Nyeri South district, identify areas of financial

management that are influential to performance of P.S.V SACCOs,

find out whether public transport SACCOs in Nyeri South District

generate cash plans and budgets based on their specific priorities

and to ensure that incoming financial resources facilitate the

fulfillment of these priorities. The findings show that public service

vehicle SACCOs have better financial management practices as

showed by the six indicators of better financial management.

Members' funds are protected against loan delinquency by setting

funds and provision for statutory reserve provided for through

cooperative Act. SACCOs have effective financial structure, high

rate of return and high Loan Repayment. There are signs of

growth indicated by positive change in the levels of profitability,

turnover and capital. Better financial management practices have

resulted to better performance of the SACCOs. The dividends

payout for the members of the SACCOs is fairly high and is

expanding, annually. The share capital level of the SACCOs has

increased over the years of their existence. With expanding saving

members are able to access credit facilities resulting to increased

number of vehicles. The public service vehicle SACCOs have

31
 therefore continued to exist and grow over the years dominating

the public transport sector.

2.3 Theoretical Framework

(Kotler & Gary, 2005) described theoretical framework as a

collection of interrelated concepts such as in a theory to guide a

research work as it determines the items for measurement and the

statistical relationships being studied. A theory is a reasoned

statement or group of statements, which are supported evidence

meant to explain some phenomena.

2.3.1 Cash Management theory

The purpose of cash management is to determine and

achieve the appropriate level and structure of cash, and

marketable securities, consistent with the nature of the business's

operations and objectives (Brigham, 1999). As Erkki (2004)

asserts, Models on cash balance management have been proposed

by (as cited in (Baumol, 1952), (Archer, 1966), (Beranek, 1963),

(Miller & Orr, 1966), (Pigou, 1970), (Lockyer, 1973), & (Gibbs,

1976)) among others. (as cited in William Baumol,1952) was the

first person to provide a formal model of cash management. As

Erkki (2004) asserts, this model applied the economic order

quantity (EOQ) to cash. Brokerage fees and clerical work form

32
order costs while foregone interest and cash out costs form the

costs of holding cash. Baumol’s model is however probably the

simplest, most striped down and sensible model for determining

the optimal cash position (as cited in Ross, 1990). (as cited in

Lockyer, 1973) on the other hand modified Baumol’s model to

incorporate overdraft facilities. According to Lockyer’s approach

the total annual cash policy cost attributable to the use of

overdraft facilities is given by the sum of total annual cash transfer

cost, total annual overdraft cost and the total annual holding cost.

As Erkki (2004) asserts, Lockyer’s model is critiqued for assuming

overdraft facilities, which are not automatic especially for firms

with poor credit rating. The model also assumes disbursements

are even over the planning period.

Erkki (2004) asserts, the cyclical nature of cash is recognized

(as cited in Archer, 1966) who reasons that apart from providing a

cash balance for transactional purposes, a cash balance should be

provided for precautionary purposes, especially for seasonal

activities that are unpredictable. In Archer’s approach, costs

related to overdraft facilities and capital costs of precautionary

balances are compared to determine the optimum. Archer’s

approach is advantageous for it recognizes the cyclical nature of

33
net cash flows of many firms. As Erkki (2004) asserts, enhances

the reasoning (as cited in Archer, 1956). According to Gibbs, the

determination of optimal cash balance involves a combination of

investment and financial decisions. In Gibbs approach, cases

where demand for money is of a cyclical nature a combination of

short and long term borrowing should be used to avoid the use of

long term funds to cover peaks arising from idle cash balance,

during periods of low cash demand. Gibbs contends that, the

determination of the amount of buffer money to hold is seen as an

investment decision. Gibbs approach emphasizes holding costs,

costs of short and costs of long-term borrowing and the costs of

investment in marketable securities, (Erkki, 2004).

In order to do this a variety of activities need to be

undertaken, because of the integrative nature of cash to the

operation of the SACCO. Since most of the SACCO operations

revolve around advancement of cash then it is imperative for a

considerable minimum level of cash to be maintained. How a

SACCO manages cash will definitely have implications on the

liquidity of the SACCO. The theory therefore is of essence on the

bases of the policy the SACCOs may have in place with regard to

cash retention so as to avoid illiquidity.

34
2.3.2 Free Cash Flow Theory

Huseyin (2011) asserts, managers have an incentive to

hoard cash to increase the amount of assets under their control

and to gain discretionary power over the firm investment decision,

(as cited in Jensen, 1986). Having cash available to invest, the

manager does not need to raise external funds and to provide

capital markets detailed information about the firm’s investment

projects (Huseyin, 2011). Hence, managers could undertake

investments that have a negative impact on shareholders wealth.

Managers of firms with poor investment opportunities are

expected to hold more cash to ensure the availability of funds to

invest in growth projects, even if the NPV of these projects is

negative(Huseyin,2011). This would lead to destruction of

shareholder value and, even if the firm has a large investment

programme and a low market-to-book ratio. Thus, using the

market-to-book ratio as a proxy, it is likely that the relation

between investment opportunity set and cash holdings will be

negative. This is critical in management of liquidity in the firm and

ensuring there is a balance between meeting the current

obligation to mitigate liquidity short fall and investing in the

interest of shareholders wealth maximization (Huseyin, 2011).

35
2.4 Historical Background of The Case Study

In the olden days, the practice of banking system was a

primitive one.

In 1892, Nigeria First Bank the African banking corporation

was established. No banking legislature existed until 1952 at which

point Nigeria had three foreign banks (the Bank of British West

Africa, Barclays Bank, National Bank of Nigeria and African

Continutal Bank) with a collective total of forty (40) branches.

A 1952 ordinance set standard, required reserve funds

established bank examinations and provided for assistance to

indigenous banks for decades after 1952, the growth of demand

deposit was showed by the Nigerian, rain, propensity to prefer

cash and to distrust checks for debt settlements.

British colonial officials established the West African currency

board in 1912 to help finance the export trade foreign firms in

West Africa and to issue a West African Currency convertible to

British funds sterling.

However, Colonial policies barred local investment of

reserves, discouraged deposit expansion, precluded disc retain for

monetary management and did nothing to train Africans in

developing indigenous financial institutions.

36
 Among other things banks to look into in the course of this

study are Union Bank Plc, Unity Bank Plc, Guaranty Trust Bank Plc

and United Bank for Africa Plc.

Union Bank of Nigeria was established in 1917 as a colonial

bank with its first branch in Lagos in 1925, Barclays bank acquired

the colonial bank which resulted in the change of the bank name

to Barclays bank. Following the enactment of the companies act in

1968 and legal requirement for all foreign subsidiaries to be

incorporated locally, Barclays Bank Plc was incorporated in 1969 as

Barclays bank of Nigeria limited.

Unity bank was founded in 2006 from mergers to meet up

with the central banks requirement as consolidation. The bank

products include current and saving accounts, time and term

loans, call and fixes deposits and overdrafts it offers cash

management , inventory and mortgage financing import clearing

and internet and mobile banking services.

United Bank for Africa (UBA) history dates bank to 1948

when the British and French Bank Limited (BFB) commenced

business in Nigeria following Nigeria’s intendance for Britain, UBA

was incorporated in 1961 to take over the business if BFB.

Meanwhile, guaranty trust bank plc was incorporated as limited

37
liability Company licensed to provide commercial and other

banking services to the Nigerian public in 1990. In February 1991,

the bank commenced operations and has since then grown to

become one of the most respected and services focused bank in

Nigeria.

All these afore mentioned banks will be visited during the

course of this research to evaluate them on how effective in their

management of cash which is the means of controlling cash

inflows and outflows in banking industries.

38
 CHAPTER THREE

METHODOLOGY

The research method used in any research work is to

determine substantially the nature of the problem and objectives

of the study, since the empirical study is aimed at investigation or

evaluation the effectiveness of cash management control in

selected banks.

3.1 Research Design

The study adopts a survey design which gives room for the

use of questionnaire to gather data for analysis.

3.2 Area of the Study

The research work is limited to the selected bank in Nigeria.

The research will be examining the role it play in controlling of

cash in banking industry, by looking at the evaluation and cash

management.

3.3 The Population Of The Study

39
 The population of the study is the staff of selected banks in

Kogi state banking industry which comprises of manager and the

staff that are in charge of cash payment and the customer of the

selected banks. The numbers of this group of people were 150.

3.4 Sample Size

A sample of 38 people was selected using a sample random

sampling method.

3.5 Method of Data Collection

The method used for data collection by the research is both

the primary and secondary method of data analysis in analyzing

the data used in this research work. In this study the primary

method of data collection that the researcher used was

questionnaire which was administered to the respondents.

The secondary method of data analysis were book which

was used to verify some information already in existence which

have been gathered from the interviewers, the researcher was

able to lay half on some important books, magazines, journals of

banking in Nigeria.

3.6 Administration and Retrieval of Instrument

40
 The administration of instrument is basically through

personal contact with the various respondents of the staffs

virtually some of them responded well to question which brought

about the success of the exercise. One hundred and fifty (150)

questionnaires were distributed to the staff but only thirty eight

(38) were properly filled and returned after several visits.

3.7 Problems of Methodology

This study was carried out with reference to pass authors

the firm’s information brochure, and conferences etc as methods

of data collection. Also another problem encountered by the

researcher with the questionnaire method was the lack luster

attitude of people towards research.

Most of the respondents felt reluctant to accept copies of the

questionnaire. Those who accept the copies also had to be

continuously beseeching to fill them and return. Other problems

or constraints suffered are:

Some staff of the organization were always absent and not

on seat, and sometimes too busy to attend to the researcher.

Some of the staff was unwilling to let out some information

that they regarded as sensitive, confidential or secret.

3.8 Method of Data Analysis

41
 The methods used in conducting this research work were

editing, coding, tabulation, percentage, chart, statistical tool and

contingency table.

i. Editing: The data gathered from the questionnaire were edited

with a view to sorting out errors.

ii. Coding: This involves assigning numerical of alphabet or figures

to the data in addition to establishing categories of data to

facilitate analysis.

iii. Tabulation: This is the arrangement and interpretation of

information. In this research work, the generated data were

tabulated.

iv. Percentages: The tabulated data were converted to percentages.

v. Statistical tool: The statistical tool used in this researcher work

is the chi—square method of x2 = ∑ (Fo-fo)
Fo
Were X2= Chi square

∑ = Summation

Fo = Observe Frequency

Fe = Expected Frequency

Decision Rule:

Chi- square formular given as

42
X2 = ∑ (Of –Ef)
Ef
Where

X2 = Chi-square

∑ = Summation

OF= Observed Frequency

EF= Expected Frequency

Decision Rule: If X2 calculated is more than X 2 tabulated, accept

H1 and reject H0 and vice versa.

43
 CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

This chapter deals with the percentage data regards to the

responses received form the respondents. The responses will be

analyzed in tabular form which the research would base judgment

on information received. Section A deals with the Bio data of

respondents and Section B deals with the research questions

Section A

Table 4.1: Age of Respondents

Age No. of respOndents Percentage (%)

21-30 years 6 15.4
31-40 years 12 31.6
41-50 years 11 29
51 years and 9 24

above
Total 38 100
Source: Field Survey, 2018

The table above shows that 6 respondents representing 15.4% are

between the ages of 21-30 years, 12 respondents representing

44
31.6% are between 31-40 years, 11 respondents representing

29% are between 41-50 years while 9 respondents representing

24% are 51 years and above.

Table 2: Sex of Respondents

Sex No. of Respondents Percentage (%)

Male 20 53
Female 18 47
Total 38 100
Source: Field Survey, 2018

The table 2 above shows that 20 respondents representing

53% are male workers of the bank while 18 respondents

representing 47% are females.

Table 3: Marital Status of Respondents

Marital Status No. of Respondents Percentage (%)

Single 23 61
Married 15 39
Total 38 100
Source: Field Survey, 2018

The above table 3 shows that 23 respondents representing

61% are singles while 15 respondents representing 39% are

married.

Table 4: Educational Qualification of Respondents

Qualification No. of Respondents Percentage (%)

National Diploma 8 21.1
HND/BSC 14 36.8
Master’s Degree 16 42.1
Total 38 100
45
 Source: Field Survey, 2018

The above table shows that 8 respondents representing

21.1% are National Diploma holders, 14 respondents representing

36.8% are Higher National Diploma or Bachelor’s Degree holders

while 16 respondents representing 42.1% are Master’s degree

holders.

Table 5: Working Experience

Work Experience No. of Respondents Percentage (%)
1 – 5 years 9 23.6
6 – 10 years 11 28.9
11 – 15 years 10 26.3
16 years and above 8 21.2
Total 38 100
Source: Field Survey, 2018.
The above table shows that 9 respondents representing 23.6%
have 1-5 years working experience, 11 respondents representing
28.9% have 6-10 years working experience, 10 respondents
representing 26.3% have 11-15 years working experience while 8
respondents representing 21.2% have 16 years and above
working experience.
Question One: Does commercial bank comply with central bank

regulation?

Table 6:

Variable No. of Respondents Percentage %

Yes 30 79
No 8 21
Total 38 100

46
 Source: Field Survey, 2018

The figure review that 30 respondents represented by 79% were

of the view that commercial banks comply with central bank

regulation while 8 respondents which represents 21% disagreed

that commercial banks do not comply with central bank regulation.

Question Two: Can effectiveness and control of cash be done

through the computer?

Table 7:

Variable No of Respondents Percentage %

Yes 32 84%
No 6 16%
Total 38 100%

So

Source: Field Survey, 2018

47
 From the above indication that 32 respondents representing

84% agreed that effectiveness and control of cash can be done

through computer while 6 respondents representing 16%

disagreed.

Question Three: Can customers hope be restored in the

banking sector?

Table 8:

Variable No of Respondents Percentage %

Yes 34 89%
No 4 11%
Total 38 100%

Source: Field survey, 2018

From the above 34 respondents representing 98% agreed that

hope of customers can be restored while 4 respondents

representing 11% disagreed.

Question Four: Are there any relevance of cash management

and control in the banking industry?

Table 9:

Variable No of Respondents Percentage %

Yes 22 58%
No 16 42%
Total 38 100%

48
 Source: Field survey, 2018

From the above table, it show that 22 respondents representing

58% agreed that it relevance of cash management and control in

the banking industry while 16 respondents representing 42%

disagreed.

Question Five: Are there any cause of incompetence and sharp

practice in the baking industry?

Table 10:

Variable No of Respondents Percentage %

Yes 19 50%
No 19 50%
Total 38 100%

Source: Field survey, 2018

In the table above, we have 19 respondents representing 50%

agreed while respondents representing 50% disagreed.

4.1 Testing of Research Hypothesis

The research question formulated in chapter one of the

research works is tested in order to know which is to be accepted

49
and which is to be rejected, by using table formula there aid the

research to draw a conclusion based on findings.

In this research work two table research question used or

tested in both null hypothesis (Ho) and alternative hypothesis (Hi)

QUESTION ONE: Does the commercial bank comply with central

bank regulation?

Table 6:

Variable No of Respondents Percentage %

Yes 30 79%
No 8 21%
Total 38 100%

Hi: Cash management has significant impact on firm’s productivity

Ho: Cash management has no significant impact on firm’s

productivity
50
Response Fo Fe Fo-Fe (Fo-Fe)2 (Fo-Fe)2
Fe
Yes 30 19 11 121 6.37
No 8 19 -11 121 6.37
TOTAL 38 38 0 242 12.74

Where Fo= Observed Frequency

Fe= Expected Frequency

Level of significance = 5% = 0.05

Degree of freedom = k-1

X2 + tab = 0.05 1 = 3.841

Chi square X2 = (Fo-Fe)2 = 12.74

Decision: Since X2 calculate is greater than table reject Ho and

accept Hi

Conclusion: Cash management has significant impact on firms

productivity.

HYPOTHESIS TWO

Information technology has significant impact on cash

management

51
 Variable No of Respondents Percentage %
Yes 34 89%
No 4 11%
Total 38 100%

Hi: Information technology has significant impact on cash

management

Ho: Information technology does not have significant impact on

cash management

Response Fo Fe Fo-Fe (Fo-Fe)2 (Fo-Fe)2

Fe
Yes 34 19 15 225 11.84
No 4 19 -15 255 11.84
Total 38 38 0 480 23.68

WheFo= Observe Frequency

Fe= Expected Frequency

Level of significance = 5% = 0.05

Degree of freedom = K-1 = 2-1 = 1

X2 + tab = 0.05 1 = 3.841

Chi square X2 = (Fo-Fe)2 = 23.68

Decision: Since X2 calculate is greater than table reject Ho and

accept Hi

52
 Conclusion: Information technology has significant impact on

cash management

HYPOTHESIS THREE

Question Four: Are there any relevance of cash management

and control in the banking industry

Table 9:

Variable No of Respondents Percentage %

Yes 22 58%
No 16 42%
Total 38 100%

Hi: Cash management and control is relevant in the banking

industry

Ho: Cash management and control is not relevant in the banking industry

Response Fo Fe Fo-Fe (Fo-Fe)2 (Fo-Fe)2

Fe
Yes 22 19 3 9 0.47
No 16 19 -3 9 0.47
Total 38 38 0 480 0.94

WherFo= Observe Frequency

Fe= Expected Frequency

Level of significance = 5% = 0.05

53
 Degree of freedom = K-1 = 2-1 = 1

X2 + tab = 0.05 1 = 3.841

Chi square X2 = (Fo-Fe)2 = 0.94

Decision: Since X2 calculate is less than table reject Ho and accept

Hi

Conclusion: Cash management and control is relevant in the

banking industry

4.2 Discussion of Findings

The aim of this research is to find out impact of cash

management in banking industry using First Bank Nigeria Plc

Lokoja branch.

From the data presented and analyzed in hypothesis one it

was discovered that cash management has significant impact on

firm’s productivity.

From the data presented and analyzed in hypothesis two it

was also discovered that customers hope can be restored in the

banking industry.

Also, from the data presented and analyzed in hypothesis

three it was discovered that cash management and control is very

relevant in the banking industry.

54
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary

The research work is on the evaluation of the effectiveness

of cash management and its control in banking industry. The study

also investigates how cash operation is done in banking industries.

The objective, the way and manners in which banks manage

their cash, the cause of delay in obtaining loan by the customers,

embezzlement and defalcation to achieve its objectives.

55
 From the data presented and analyzed in hypothesis one it

was discovered that cash management has significant impact on

firm’s productivity. From the data presented and analyzed in

hypothesis two it was also discovered that customers hope can be

restored in the banking industry.

Also, from the data presented and analyzed in hypothesis

three it was discovered that cash management and control is very

relevant in the banking industry.

5.2 Conclusion

The management of cash is aimed at satisfying the cash

requirement of the establishment for its existence and it effective

utilization of cash as an asset.

The importance of banking services is not work ignoring,

also the researcher in the vital area of the economy cannot be

overemphasized. From the study, we have gathered from what we

obtained form the selected banks on Nigeria that the banking

industry is doing well in terms of management and control of cash.

5.3 Recommendations

In order to improve the service of the bank and evaluate the

problem and arrive at the goals, the researcher suggests the
following recommendation.

56
1. Employment of sufficient competent staff to run the account
department customers should be given proper education on the
adopted between the meeting should be adopted between the
management and significant number of customer so as to
understand common problem facing them.

2. Branch managements were advised to replace or repair some

facilities like the marching tubes for the detection of fake notes
and furniture to enhance general condition of the working
environment. Management is called upon to expedite action on
increasing the numbers of personal computers in the branch.

3. Management should adopt immediate implication of bulk counters

to support the regular cashier. Cash office/area cash officer to
have summaries at the area or regional level to review, refresh
from time to time procedure to teller.

REFERENCES

Agene, C.E. (1995). Principle of Modern Banking 1 st Edition.

Nigeria: Wuse, Abuja. Gene Public Limited.
Argent,C.A. (2012). Cash Management Techniques. London: Aleen
Publication.
Awao, A.R, and Osaze, B.E, (1987). Investment Analysis and
Management. The Charter Institute of Banking Nigeria.
Lagos: Nigeria.
Egbabor, E. (2000). The Role of Banking in Security Network
Financial Standard, Ibadan: Macmillan Publishing Nig. Ltd.

57
Fale, M.I. (2009). Cause of Distress in the Banking Sector Monthly
and Business Report, Lagos.
Hason, J.L. (2011). Dictionary of Economics and Commerce.
London: MacDonald.
James, O.B. (2004). Management Information System.
Management of Information Technology United Kingdom:
6th Edition Publish.
Nyabwanga, .M. (2011). Cash management and the process of
planning and controlling cash flows. Newyork: Macdon
Publishers.
Robert, F.M. (2010). Financial and Accounting. New York: John
Wiley and Sons.
Spiro, H.J. (1970). Financial and Non-financial Managers John
Wiley and Sons. New York.

APPENDIX I

Department of Accountancy,
School of Management Studies,
Kogi State Polytechnic,
P.M.B 1101,
Lokoja.
4th October, 2018

Dear Respondent,

58
 I am a final year student of the above named institutions
conducting a research on the topic “Evaluation of the Effectiveness
of Cash Management as a means of Control in Banking Industry”.
The researcher has selected your bank as one of the case
study and is therefore seeking for your assistance with regards to
the data. Any information supplied for the purpose of this study
will be treated confidentially.
The information obtained from your organization is basically
for academic purpose and will be treated with confidentiality.

Yours faithfully,

Peter Anthonia

APPENDIX II
QUESTIONNAIRE

This questionnaire is designed for the purpose of obtaining

information from the staff of the selected bank of Nigeria Plc, Kogi
Branch with the research is concerned
INSTRUCTION: Fill in the blank spaces with the appropriate

answers where options are given, tick the appropriate answer.

Section A

1. Age of Respondents
59
 21-30 years [ ]

31-40 years [ ]

41-50 years [ ]

51 years and above [ ]

2. Sex of Respondents

Male [ ]

Female [ ]

3. Marital Status of Respondents

Single [ ]

Married [ ]

4. Educational Qualification of Respondents

National Diploma [ ]

Higher National Diploma/ Degree [ ]

Master Degree [ ]

5. Work Experience of Respondents

1-5 years [ ]

6-10 years [ ]

11-15 years [ ]

16 years and above [ ]

Section B

6. Does commercial bank comply with central bank regulations?

60
 a) Yes [ ] (b) No [ ]

7. Can effectiveness and control of cash be done through the

computer?

a) Yes [ ] (b) No [ ]

8. Can customers hope be restored in the banking sector ?

(a) Yes [ ] (b) No [ ]

9. Are there any relevance of cash management and control in the

banking industry? (a) Yes [ ] (b) No [ ]

10. Are there any cause of incompetence and sharp practice in the

banking industry?

a) Yes [ ] (b) No [ ]

61