THE IMPLICATIONS OF TREASURY SINGLE ACCOUNT (TSA) ON THE NIGERIAN BANKING SECTOR AND ECONOMY
CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY: The background of Treasury Single Account (TSA) is in accordance with Executive order NO. 55b (2011), which stipulated that the Bureau of Treasury (BTr) shall operate a Treasury Single Account (TSA) to receive remittance of collections of internal revenue taxes / custom duties from Bureau of Internal Revenue (BIR) / Bureau of Customs (BOC), authorized agent banks as well as other National Government Agencies from authorized government depository banks. The TSA, which shall be maintained at the Central bank of Nigeria (CBN), will align the government policy of greater financial management and control of its cash resources and allow the unification of the structure of government bank accounts to enable consolidation and optimum utilization of government cash resources. [Bailder, CO: West View. Sun Editorial (2015)].
The banking sector of Nigeria is one of the major contributors to the growth and development in Nigeria. The economic and financial growth and status of most countries especially the developing nations depends on the level of stability in the banking industry, that’s to say that the performance of the banking sector has a significant effect on the economy of a nation.
The Treasury Single Account is a public accounting system in which all government revenue, receipts and income are collected into one single account, usually maintained by the country’s Central Bank and all payments is done through this account as well. The purpose is primarily to ensure accountability of government revenue, enhance transparency and avoid disapprobation of public funds. The maintenance of a Treasury Single Account will help to ensure proper cash management by eliminating idle funds usually left with different commercial banks and in a way enhance reconciliation of revenue collection and payment [Adeolu, 2015].
According to IMF (2010), Treasury Single Account is a unified structure of government bank account that gives a consolidated view of government cash resources. Based on the principle of unity of cash and the unity of treasury, a treasury single account is a bank account or a set of linked accounts through which the government transacts all its receipts and payment. [Lienert, 2009].
Section 80 (1) of the 1999 Constitution as amended states “All revenues, or other moneys raised or received by the Federation (not being revenues or other moneys payable under this Constitution or any Act of the National Assembly into any public fund of the Federation established for a specific purpose) shall be paid into and from one Consolidated Revenue Fund of the Federation”; successive government have continued to operate multiple accounts for the collection and spending of government revenue in flagrant disregard to the provision of the constitution which requires that all government revenue be remitted into a single account. The commercial banks were the beneficiary of this situation; most banks depend on the public fund deposited by ministries, at the end the federal government of Nigeria comes back to borrow the money with high interest rate. It was not until 2012 that government ran a pilot scheme for a single account using 217 ministries, departments and agencies as a test case. The pilot scheme saved Nigeria about N500 billion in frivolous spending. The success of the pilot scheme motivated the government to fully implement TSA, leading to the directive to all banks to implement the technology platform that will help accommodate the TSA scheme. The directive by President Mohammed Buhari that all government revenues should be remitted to a Treasury Single Account is in consonance with this programme and in compliance with the Provisions of the 1999 constitution (CBN, 2015).
Before the introduction of treasury single account in Nigeria, ministries, departments and agencies (MDA) which normally generate revenue have numerous accounts in commercial banks, they use part of the revenue generated to fund their various operations and remit the excess to the federation account. Most of these agencies pay whatever they deem fit to the federal government account; it is evident that most of these agencies are even much richer than the government. The outcome of the above occurrences leads to financial leakages, the embezzlement of public funds and so on. This made the federal government of Nigeria to prepare budget using false projections.
Eventually banks no longer cared to mobilize money from other sectors of the Nigeria economy. The balances of account of the government with the commercial banks lay idle in the banks. This situation was what led to the introduction of the government treasury single account; on the 25th February, 2015. The President of Nigeria, President Buhari instructed that all ministries should close their account with all the commercial banks in Nigeria, and transfer the various balances into the federation account with the Central Bank of Nigeria.
The directive came to the central bank of Nigeria with the circular number BPS/CSO/CON/DIR/01/079, and addressed to all deposit money banks (DMB). The circular was entitled “Commencement of federal government’s independent revenue e collection scheme under the treasury single account (TSA) initiative”.
Adeolu (2015) stated that “the maintenance of treasury single account will help to ensure proper cash maintenance by eliminating funds that are left with different commercial banks and by doing so enhance the reconciliation of revenue collection and payment.
It is to this regard that the study wishes to consider the implication of treasury single account on banking sector of Nigeria, specifically the commercial banks.
1.2 STATEMENT OF THE PROBLEM
The implementation of the policy of treasury single account (TSA) by federal government, banks will not have enough money to run their day to day activities properly. Before now, the major source of funds for banks has been the government, business and the public. Banks will continue to find a means of mobilizing funds from private sector or the public.
Treasury single accounts (TSA) has a negative impact on banks in Nigeria because banks has been surviving with government funds, with the introduction of treasury single account (TSA) those money which are been used to trade would been paid into the country’s treasury account. These money which are paid into treasury are used to appraise government performance.
The era of banks depending on government funds has since passed consequences upon the introduction of treasury single account. Banks should have to look for another source of generating funds in Nigeria. The lack of fund for banks will increase than services toward their customers, it will also create room for staff competition amongst banks.
The implementation of the policy of treasury single account (TSA) by federal government has led to increase in unemployment rate in Nigeria. Okafor(2013) found that in the Nigeria banking sector has human resources challenges, Matannu(2015) cited in Idowu (2005) identified a yawning gap between the immediate or short term effects of economic reforms and the necessary ideals of job security. He concluded that the ability of reforms is to create employment in the last one decade had been very few and far between.
Adeyeme (2007) added that banking reforms such as treasury single account in Nigeria will result in job loss. The implementation of the policy of treasury single account (TSA) by the government will increase in deposit interest rate.
Anyanwu (2010) highlighted the challenges to the recent banking, in his study he include the unfavorable macro-economic environment, cumbersome documentation process, inadequate long term finance, lack of data base on borrowers and poor infrastructure because of the low liquidity of banks, they have to encourage the public by increase interest in rate on deposits.
Zubairu (2006) identified human resources realignment technology integration, stakeholders concern, and monitoring and supervision problems as cumulating from the consolidation of banks in Nigeria. We see a return of the era where women are employed by banks specifically for deposit mobilization and forcibly encouraged to use any means necessary to get funds. Consequent upon the forgoing, the study is poised to examine the impact of treasury single account on the Nigerian banking sector.
1.3 OBJECTIVES OF THE STUDY
The following are the objectives of the study
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To examine the implication of treasury single account on the banking sector in Nigeria.
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To examine the implication of the treasury single account on the economic development in Nigeria.
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To identify the benefits of treasury single account.
1.4 RESEARCH QUESTION
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What are the implications of treasury single account in the banking sector in Nigeria?
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What are the implications of treasury single accounts on the economic development in Nigeria?
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What are the benefits of treasury single account?
1.5 STATEMENT OF RESEARCH HYPOTHESIS
The under listed hypothesis are hereby formulated.
1 H0: There is no significant relationship between treasury single account (TSA) and the banking sector in Nigeria.
H1: There is a significant relationship between treasury single account (TSA) and the banking sector in Nigeria.
2 H0: there is no significant relationship between treasury single account (TSA) and economic development in Nigeria.
H1: there is a significant relationship between treasury single account (TSA) and the economic development.
3 H0: there is no significant benefit of treasury single account (TSA) and the general Nigeria public.
H1: there is a significant benefit of treasury single account (TSA) and the general public.
1.6 Significance Of Study
The study of the implications of treasury single account (tsa) on the Nigerian banking sector and economy will be of great benefit to the federal government of Nigeria, the commercial banks in Nigeria, the ministries, departments and agencies in Nigeria and of most importance to the citizens of Nigeria as proper budget and fund allocation to all sectors of the economy will be done appropriately. Finally the research will be of great benefit to students and other researchers that wish to carry out similar research work on the above topic.
1.7 SCOPE OF THE STUDY
This study focuses on examining the implication of treasury single account on the banking sector in Nigeria. This study will also examine the implication of the treasury single account on the economic development in Nigeria. This study will further identify the benefits of treasury single account. The sample design for the research work is the selected commercial banks in Nigeria and the sample size for the research work is six (6) commercial banks in Nigeria that are being used by government MDAs in implementing the Treasury Single Account system. The choice of the banks is through purposive sampling.
The commercial banks in the sample size are; United Bank for Africa Plc, Access Bank Plc, First Bank of Nigeria Plc, Fidelity Bank Plc, Zenith Bank Plc, and Unity Bank Plc.
1.8 LIMITATIONS OF THE STUDY
Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. Insufficient funds tend 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), which is why the researcher resorted to a moderate choice of sample size. More so, the researcher will simultaneously engage in this study with other academic work. As a result, the amount of time spent on research will be reduced.
1.9 DEFINITION OF TERMS
TSA: refers to Treasury Single Account, is a financial policy or unified structure of government banking introduced by the federal government of Nigeria in 2012 to consolidate all inflow from the country’s ministries, departments and agencies (MDAs) by way of deposit into commercial banks, traceable into a single account at the Central Bank of Nigeria.
Financial Leakages: refers to improper outflow of public fund from a circular flow of income model.