EFFECT OF TREASURY SINGLE ACCOUNT ON NIGERIAN BANKS AND THE ECONOMY OF NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Over the years, Nigeria banks have gone through numerous development stages, transformations and procedures, Boulder 2014. According to report, a good number of banks could not withstand the earthquake and change.  Ever since the invention of banks, the economic state of every country now lies on how stable or unstable their banking industry is. Therefore, once a problem affects nation’s banks, it will definitely affect or have an impact on the economy. In recent times, the Ministries, Department and Agencies (MDAs) which generateincome, have a very large number of accounts in commercial banks, and utilize part of the income generated to finance their operations and then send the excess to the federation account, Akandele 2015. All these happened before the invention of Treasury Single Account (TSA).As a result of the system, some ministries became richer than the government. The outcome of this systemcomprisesloopholes of funds, stealing t of public funds;thegovernment was unable to dictate the exact amount in its account, Adeolu 2015. Budgets were also prepared using treacherousschemingwhich lead to poor implementation. Howbeit, the greatest beneficiaries in this system were the banks that hugely depended on the deposits from public and high- interest rate they charge banks for each time they borrow from them. To cap it all, banks no longer bother to put money into circulation and to gather money from other sectors of the economy. The balances of account of the government with the banks are always dormant in the banks. These hunted the development of the Nigerian economy, Bhatti 2012.

Treasury Single Account (TSA) has been defined by a number of researchers. It is defined as a joint or unitedconstruct of government bank accounts that permitsunionism and completeusage of government cash resources. Through this accounts or related bank accounts, the government carries on all her operations including remitting all its receipts and payments and gets a jointperception of its cash position at any given time, Baumgartner 1993.

Treasury Single Account is known as a public accounting system through which all government income, receipts and revenue are gathered into a central account, all payments are done through this account, and isoften managed by the country’s Central Bank. The major reason for the introduction and implementation of such account is to assure accountability of government revenue, encourage and promote transparency and prevent misapplication of public funds, Blomquist 2007. Proper management of a Treasury Single Account will assist in making sure there is an ordered cash management by putting an end todormant funds that is often left with different commercial banks and in a way to encourage reconciliation of revenue e collection and payment.

The TSA is a pronounced method and tool for active and productive management of government’s funds, banking and cash position. In agreement with the name, it combines and joins all government accounts to a single treasury account. The merits of the TSA economic development as well as banks are too numerous to mention. The act of joining accounts into a TSA saves time and encourages prompt capture and payment of all necessary revenues into government coffers without the mediation of multiple banking arrangements. Like we said earlier, it prevents revenue loopholeswhen it comes to revenue loss and bad management by operators of all revenue-generating agencies.

The concept of TSA came into existence when some agencies declined to pronounce and transfer the 25 percent of their annual revenue they produced to the treasury as required by law. In the year 2012, about N120 billion was forcefully taken by government from MDAs being 25 percent of their gross revenue to the treasury with another N34 billion taken in 2013. Before the incident, most of the MDAs were disinclined to transfer the amounts that were asked for by law to the treasury.

Base on the seen good cash management practices, the Treasury can at all times have a general view of government’s cash position, as against the fragmented positions of different Ministries, Department and Agencies (MDAs), thatrequire to be industriouslydragged together to get the general picture, Ambless 2000. A TREASURY Single Account (TSA) is therefore a network of other accounts that are joined to a major account so that, all the transactions are reflected in the subsidiary accounts but closing balances on these subsidiary accounts are remitted to the main.

Another benefit of TSA is that it provides diverse advantages and thus, enhancing the general effectiveness of a public financial management (PFM) system, Adaugo 1990. The introduction and implementation of the Treasury Single Account (TSA) has and will help to properly manage the country’s revenue.

Also, scattering government funds in numerous commercial banks will serve as a pipe through which water passes for the entrance of fraud by government officials in the MDAs. The reason for the account is loopholes would be completely blocked and transparency and accountability fostered in the running of government businesses. If TSA is implemented, it would go a long way to assist the government to block those loopholes in revenue and maximize transparency, openness, efficiencyand productivity.

As the Federal government of Nigeria introduces Treasury Single Account, Banks will continue to device means of mobilizing funds from the private sector.  We see a return of the era when women are employed by banks specifically for deposit mobilization and tacitly encouraged to use any means necessary to get funds.  We see increase in deposit interest rates as a major means of inducing customers and most importantly we see a drop in lending and in the profitability of banks, at least, in the short to medium term until they fully come to terms with the impact of the policy and begin to properly position themselves for true banking business.  Ultimately, we see the share price of these banks falling as investors attempt to price in the policy impact. However, the implementation of this programme is a critical step towards curbing corruption in public finance. This is a tool to combat corrupt practices, eliminate indiscipline in public finance and ensure adequate fund flow that will be channeled to critical sectors of the economy to catalyze development.

1.2. STATEMENT OF THE GENERAL PROBLEM

As the Federal government of Nigeria introduces Treasury Single Account, Banks will continue to device means of mobilizing funds from the private sector.  We see a return of the era when women are employed by banks specifically for deposit mobilization and tacitly encouraged to use any means necessary to get funds.  We see increase in deposit interest rates as a major means of inducing customers and most importantly we see a drop in lending and in the profitability of banks, at least, in the short to medium term until they fully come to terms with the impact of the policy and begin to properly position themselves for true banking business.  Ultimately, we see the share price of these banks falling as investors attempt to price in the policy impact. However, the implementation of this programme is a critical step towards curbing corruption in public finance. This is a tool to combat corrupt practices, eliminate indiscipline in public finance and ensure adequate fund flow that will be channeled to critical sectors of the economy to catalyze development.

1.3   OBJECTIVES OF THE STUDY

The major objective of the study is to examine the effect of treasury single account on Nigerian banks and the economy of Nigeria. other specific objectives of the study include;

1. To examine the implications of Treasury Single Account on money deposit banks in Nigeria.
2. To examine the implications of implementing Treasury Single Account on economic development in Nigeria.
3. To identify other benefits of Treasury Single Account in Nigeria.
4. to determine the relationship between implementation of treasury single account and the economy of Nigeria
5. To determine the relation between the implementation of treasury single account and the growth and profitability of the banking sector.

1.4   RESEARCH QUESTIONS

1. What are the implications of Treasury Single Account on money deposit banks in Nigeria?
2. What are the implications of implementing Treasury Single Account on economic development in Nigeria?
3. What are the other benefits of Treasury Single Account in Nigeria?
4. What is the relationship between implementation of treasury single account and the economy of Nigeria?
5. What is the relationship between the implementation of treasury single account and the growth and profitability of the banking sector?

1.5. RESEARCH HYPOTHESES

H01: There is no significant relationship between the implementation of treasury single account and the profitability and growth of Nigerian banks.

H02: There is no significant relationship between the implementation of treasury single account and the growth of the economy.

1.6   SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

1. The results from this study will educate the general public on the benefits of Treasury Single Account to the economy of the country. It will also educate on its temporary effect on the banking industry as huge sum of money will be leaving the sector suddenly.
2. This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.

1.7   SCOPE/LIMITATIONS OF THE STUDY

LIMITATION 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.

REFERENCES

Akande, L. 2015. Buhari orders Federal Ministries, Agencies to open Treasury Single Account. Press Release, August 9.

Adeolu I.A. 2015. Understanding The Treasury Single Account (TSA) System –Things You Should Know. Business & Economy, Market Development.

Bhatti, M. A., Hee, H. C., & Sundram, V. P. K. 2012. A guide for beginners: Data analysis using SPSS and AMOS. Kuala Lumpur: Pearson Malaysia SdnBhd.

Baumgartner, F. R., & Jones, B. D. 1993. Agendas and instability in American politics. Chicago, IL: University of Chicago Press.

Blomquist, W. 2007. The Policy Process and large-N Comparative Studies, In P. A. Sabatier (Ed.), Theories of the policy process (2nd ed., pp. 261-289).