THE EFFECT OF TREASURY SINGLE ACCOUNT ON PERFORMANCE OF MONEY DEPOSITS BANKS IN SOUTH EAST NIGERIA

ABSTRACT

This study was intended to evaluate the effect of the treasury single account on the performance of money deposit banks in south east Nigeria. This study was guided by the following objectives; To examine the impact of treasury single account on the liquidity of Nigeria money deposit banks; To examine if treasury single account has any relationship with banks unemployment crisis in Nigeria Money deposit Banks; To examine the effects of Treasury single account on Deposit Money Banks performance; To examine the effects of Treasury account on Deposit Money Banks survival using total assets, total deposit, loans and advances and profit before interest and tax; To examine the relationship between Treasury Single Account and performance of money deposit banks in Nigeria; To examine the benefits and challenges of treasury single account in Nigeria.. The study employed the descriptive and explanatory design; questionnaires in addition to library research were applied in order to collect data. Primary and secondary data sources were used and data was analyzed using the correlation statistical tool at 5% level of significance which was presented in frequency tables and percentages. The respondents under the study were staff of selected money deposit banks in south Eastern Nigeria. The study findings revealed that treasury single account has general effect on the performance of money deposit banks in south eastern Nigeria.

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

In Nigeria, commercial banks have been the custodians of government funds. The banking system in Nigeria has experienced several reforms and policies, some favourable, others unfavourable. Many banks did not survive these reforms. Until the introduction of Treasury Single Account, government Ministries, Departments and Agencies (MDA’s) operated a multiplicity of accounts in the commercial banks. The MDA’s use part of the funds they generated to fund their operation and remitted the residual to the federation account. This resulted in leakages, embezzlement of funds and inadequate budgetary and financial planning. However, the highest beneficiaries of this situation where the banks who relied on deposits from government agencies and lent back to the government at high interest rates. The banks however, operated “arm chair banking” as they no longer mobilized funds from other sectors of the economy. (Ndubuaku, Ohaegbu,Nina, &Nsimoh, 2017). The idea of TSA came into existence when some agencies refused to declare and remit the 25 percent of the annual revenue they generated into the treasury as demanded by law (Daily Trust Editorial,2015). Treasury single account (TSA) is a financial policy that was introduced under the former president Goodluck Jonathan regime in 2012; it was introduced for the purpose of consolidating all inflows from the country's ministries, departments and agencies (MDAs) by a way of deposits into money deposit banks, traceable into a single account at the Central Bank of Nigeria. About 120billion naira was forcefully collected by government from MDAs being 25 percent of their gross revenue to the treasury with another 34 billion naira in 2013(Hamisu, 2015). It was under the administration of President MuhamaduBuhari that it was fully implemented. In February 2015, the central bank of Nigeria (CBN) issued a circular directing all deposit money banks to implement the Remita e-collection platform. The Remita e-collection is a technology platform developed by system specs, which was adopted by the Central Bank of Nigeria (CBN) for the collection and remittance of governments funds to a consolidated account domiciled with central bank of Nigeria (CBN)(Central Bank of Nigeria, 2015). This marked the beginning of the implementation of treasury single account system in Nigeria. (Ndubuaku, Ohaegbu,Nina, &Nsimoh, 2017). Treasury single account (TSA) is a unified structure of governments’ account that gives a consolidated view of government cash resources. It is also a tool used to establish centralized control over governments’ revenue through effective cash management. It is a set of subsidiary accounts linked to a main account such that, transactions are made on the subsidiary accounts but the closing balances are transferred to the main account. The implementation of TSA does not stop MDAs from maintaining their individual accounts with the money deposit banks, but the daily funding of their disbursements will be made from the main account with the central bank of Nigeria (Chukwu, 2015). The implementation of TSA will help minister of Finance to monitor the fund flow as no agency will be allowed to maintain any other operational account outside the oversight of the ministry of finance (Central Bank of Nigeria, 2015). TSA will also have a positive effect on the national economic planning, swift and full budgetary implementation; reduce leakages and other irregularities in the MDAs, aid appropriate planning, data collection, analysis and timely aggregation of federal government revenue. The primary benefit of TSA is for proper monitoring of government receipts and expenditure (Kanu, 2016). The policy of treasury single account will enable government to have a centralized account for its revenue in the central bank of Nigeria, which will enable the Accountant General of Federation to monitor the flow of cash in the treasury. The policy will also help to limit corruption and leakages often associated with government revenue which will result to a more efficient and effective cash flow management (Kanu, 2016).

1.2. STATEMENT OF THE PROBLEM

Performance of many money deposit banks seem to have been on the decrease in Nigeria since the adoption of Treasury single account by the Federal Government. This is believed to be as a result of over dependence on Public Sector Funds which constitute a greater percentage of the bank deposits. These Deposit Money Banks in Nigeria seem to lack the ability to generate deposits outside the Public Sector Funds which are under the control of the Government. When the Federal Government in Nigeria fully implemented the Treasury Single account (TSA) in 2015, over 2 trillion naira deposits was moved to the Central Bank of Nigeria leaving these Deposit Money Banks financially deflated (Jat, 2016). Deposit Money Banks are therefore observed toexperience liquidity problems which may significantly affect profitability and their survival in the long run. Secondly significant reduction in these Deposit Money Banks affects their lending capacity and subsequent interest rate which strengthens these banks operations and survival. Deposit Money Banks are therefore faced with strategic thinking problems of how to stay in business or faced total liquidity.The emergence of treasury single account in Nigeria economy has led to liquidity problem and has stifled growth in the banking sector, because banks that earlier made bulk of their revenue from the numerous MDAs accounts scattered in all deposit money banks in Nigeria, will no longer be able to do that. This has compelled banks to device new means of mobilizing funds from private sector and to focus on their core banking functions such as savings aggregation and financial intermediation. However, because of the huge dependence of most banks on this revenue from government it has been very difficult to survive mainly on the core banking functions and this has made most of them to suddenly retrench large number of their staffs and also affected the level of liquidity in the banks. Their argument was that bank that fails to do so will no longer be profitable, and eventually lead to more downsizing of staff and increase in unemployment in the country. It will also cause the exchange of naira to the world major currencies to appreciate as excess liquidity will be mopped up from the system, thereby leading to instability in various sectors of the economy.

1.3. AIMS OF THE STUDY

The major purpose of this study is to examine the effect of treasury single account on performance of money deposit banks in South East Nigeria. Other general objectives of the study are:

1. To examine the impact of treasury single account on the liquidity of Nigeria money deposit banks.

2. To examine if treasury single account has any relationship with banks unemployment crisis in Nigeria Money deposit Banks.

3. To examine the effects of Treasury single account on Deposit Money Banks performance.

4. To examine the effects of Treasury account on Deposit Money Banks survival using total assets, total deposit, loans and advances and profit before interest and tax.

5. To examine the relationship between Treasury Single Account and performance of money deposit banks in Nigeria.

6. To examine the benefits and challenges of treasury single account in Nigeria.

1.4 RESEARCH QUESTIONS

1. What are the impacts of treasury single account on the liquidity of Nigeria money deposit banks?

2. To what extent does treasury single account has any relationship with banks unemployment crisis in Nigeria Money deposit Banks?

3. What are the effects of Treasury single account on Deposit Money Banks performance?

4. What are the effects of Treasury account on Deposit Money Banks survival using total assets, total deposit, loans and advances and profit before interest and tax?

5. What is the relationship between Treasury Single Account and performance of money deposit banks in Nigeria?

6. What are the benefits and challenges of treasury single account in Nigeria?

1.5 STATEMENT OF HYPOTHESES

H01: There is no significant effect of Treasury single account on Deposit Money Banks performance

H02: There are no challenges to the effective implementation to the treasury single account in Nigerian money deposit banks.

H03: The implementation of the single treasury account has not improved the performance of money deposit banks in Nigeria

H04: There is no significant influence of the implementation of Treasury single account on commercial bank profitability in Nigeria.

H05: There is no significant relationship between Treasury Single Account and performance of money deposit banks in Nigeria.

H06: There is no significant relationship between the implementation of Treasury Single Account and service delivery in money deposit banks in Nigeria.

1.6 SIGNIFICANCE OF THE STUDY

The result from this study would go a long way to enlighten the policy makers and the government on the impact of TSA on the banking system and would also serve as an input and guide to policy formulation. Because this topic is reasonably new, it would help the public understand fully the impact of TSA, it pros and cons and its effect on the economy. It would also contribute knowledge to literature for scholars and researchers interested in carrying out further research.

1.7 LIMITATIONS OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8 OPERATIONAL DEFINITION OF TERMS

Treasury Single Account: A treasury single account (TSA) is an essential tool for consolidating and managing governments' cash resources, thus minimizing borrowing costs. In countries with fragmented government banking arrangements, the establishment of a TSA should receive priority in the public financial management reform agenda.

Performance: The accomplishment of a given task measured against preset known standards of accuracy, completeness, cost, and speed. In a contract, performance is deemed to be the fulfilment of an obligation, in a manner that releases the performer from all liabilities under the contract.

Banks: A bank is a financial institution licensed to receive deposits and make loans. Banks may also provide financial services, such as wealth management, currency exchange and safe deposit boxes. There are two types of banks: commercial/retail banks and investment banks. In most countries, banks are regulated by the national government or central bank.