ABSTRACT
This study examined the impact of liquidity on the performance of commercial banks in Nigeria from 2000 to 2015. Profit before tax was used as proxy for dependent variable while liquidity ratio (LQR), lending interest rate (INTR) and exchange rate (EXR) were used as proxies for explanatory variables. The study used descriptive statistics and Ordinary Least Squares (OLS) for data analysis.The study finds that liquidity ratio [2.43311] significantly affected profit before tax; lending interest rate on the other hand significantly [2.1924] affected profit before tax within the study period. The coefficient of determination (R2 = 0.4343) means that about 43% of the changes in the dependent variable was explained by the independent variables included in the model. Based on the results and findings of the study, we recommend that: commercial banks should give priority to their liquidity ratio by expansion of credit creation activities and reduction of high risk off-balance sheet activities; commercial banks should further reduce their interest rate in order to attract more borrowers as this will increase their liquidity position as well as profitability.