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CHAPTER
ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF STUDY
The
banking sector is the engine of any nation’s economy. The economic status of
any nation depends on how stable their banking industry is. In other words, any
issue that affects banks also has an impact on the economy of the nation (Kanu,
2016). 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 TSA, government Ministries,
Departments and Agencies (MDA’s) operated a multiplicity of accounts in the
commercial banks.
Treasury
Single Account (TSA) is a financial policy used in several countries all over
the world. It was introduced by the federal government of Nigeria in 2015 to
consolidate all inflows from all agencies of government into a single account
at the Central Bank of Nigeria. TSA was introduced so as help to monitor the
government revenue, and also stifle the corruption in Nigeria. TSA is a
relatively new public accounting system; it uses a single account or a set of
linked accounts by the government. The primary purpose is to control the
government revenue and make sure that all the payments have been made through a
Consolidated Revenue Account (CRA). The introduction of treasury single account
is as a result of numerous corrupt practices that exist in Nigeria, such as
lack of transparency and accountability (Kano, 2016).
The
policy was introduced to reduce the proliferation of bank accounts operated by
ministries, Departments and Agencies (MDAs) and also to promote transparency and
accountability among all organs of the governments to ascertain the amount that
is accruing to its accounts on a daily basis. It is a financial tool that
unifies all government accounts in a single pool for effective cash management
(Odewole, 2016).
TSA
is believed to be an efficient and effective means of managing government
revenue generation and system that provide and enforce sufficient self–control
mechanism on revenue generation and budget implementation using a daily return
from account balances of various MDAs into a central account (Adebisi &
Okike, 2016). However, since the implementation of Treasury Single Account, it
is still unclear on how the new system has affected federal government revenue
specifically, and the country’s economic growth at large. It is against this
background that we are motivated to examine the impact treasury single account
has on revenue generation and economic growth in Nigeria.
The
TSA is a Unified structure of government bank accounts enabling consolidation
and optimal utilization of government cash resources. Through this bank account
or set of linked bank accounts, the government transacts all its receipts and
payments and gets a consolidated view of its cash position at any given time
(Yusuf, 2016).
Prior
to the introduction to TSA, Nigeria had fragmented banking arrangement for
revenue and payment transactions. These were more than 10,000 bank accounts in
multiple banks which made it impossible to establish government consolidated
cash position at any point in time. It led to pockets of idle cash balances
held in MDA’s account when government was out borrowing money (Obinna, 2015).
(Yusuf, 2016) added that “the maintenance of Treasury Single Account will help
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
1.2 STATEMENT OF THE PROBLEM
According
to Adeolu, (2015)Treasury single account is a public accounting system in which
all revenue, receipts and payment of the government are collected into a single
account, which is usually maintained by the central bank of a country and
payments are done through the same account. 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.
Finally,
several research has been carried out on the impact of treasury single account
but not even a single research has been carried out on the impact of treasury
single account on financial performance of banks in Nigeria before and after
appraisal approach.
1.3 AIMS AND OBJECTIVES OF STUDY
The
main aim of the study is to determine the impact of treasury single account on
financial performance of banks before and after appraisal approach. Other
specific objectives of the study include:
1.
to determine the effect of treasury
single account on financial performance of banks
2.
to determine the factors affecting
treasury single account.
3.
to determine the extent to which treasury
single account affects bank performance in Nigeria.
4.
to proffer solutions to the problems.
1.4 RESEARCH QUESTIONS
1.
What is the effect of treasury single
account on financial performance of banks?
2.
What is the factors affecting treasury
single account?
3.
What is the extent to which treasury
single account affects bank performance in Nigeria?
4.
What are the solutions to the problems?
1.5 STATEMENT OF RESEARCH HYPOTHESIS
H0: there are no variations in the performance
of Nigeria banks before and after appraisal approach of treasury single account
H1:
there are variations in the performance of Nigeria banks before and after
appraisal approach of treasury single account
1.6 SIGNIFICANCE OF 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. Finally, the study will contribute to the body
of existing literature and knowledge to this field of studies and basis for
further research.
1.7 SCOPE OF STUDY
The study on the impact of treasury
single account on financial banks is limited to Nigeria.
1.8 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.
1.9 DEFINITION OF TERMS
Impact:A marked effect or influence.
Treasury Single
Account:It
is an essential tool for consolidating
and managing governments’ cash resources, thus minimizing borrowing costs.
Bank:Is a financial institution that
accepts deposits from the public and creates credit.
REFERENCES
Akande,
L. (2015), “Buhari orders Federal Ministries, Agencies to open Treasury Single
Account”, Press Release, August 9 Agbakoba, O. (2016). Federal Government to
return all monies from the TSA to Banks. Premium newspaper, Sep. 28, P21 Ali
Hashim and Allister J. Moon, “Treasury Diagnostic Toolkit, Worldbank working
paper #19,2004 Biago Bossone and MassimoCirasino, The oversight of the payments
systems; A framework for the Development and Governance of payment systems in
Emerging Economies, worldbank Report, july 2001 Central Bank of Nigeria (2014),
“Communique No. 94 of the Monetary Policy Committee Meeting”, March 24- 25, pp
1 – 37 Collins, J. and Hussey, R. (2003) Business Research a practical guide
for undergraduate and Post-graduate students, 2 nd Ed. New York, Palgrave
Macmillan Eme, O. I., Emmanuel, N. I. and Chukwurah, D. C. (2015). Analysis of
pros and cons Treasury Single Account policy in Nigeria. Arabian Journal of
Business and Management Review (OMAN Chapter), Vol. 5, No. 4, Nov, 2015, Pp
20-39 Garbade, K. D. et.al, 2004). Fundamentals of Financial Management (11th
edition), Delhi: Pearson Education, Inc. James A. and Moses A. (2012). Impact
of Tax Administration on Government Revenue in a Developing Economy – A Case
Study of Nigeria. International Journal of Business and Social Science. Vol. 3
No 8, Pp 105 Larson, M. C. (2007). Local Government Cash Management, Chapter 2
in Local Public Financial Management, ed. by Anwar Shah, The World Bank.
Ocheni, K. D. (2016). Treasury Single Account: A catalyst for public financial
management in Nigeria. A paper presented at a workshop organised by Association
of National Accountants of Nigeria (ANAN), International Federation of
Accountants (IFAC), Office of the Accountant-General of the Federation (OAGF) and
The World Bank in Abuja Publication of Public Expenditure and Financial
Accountability (PEFA) Framework, May 2006. Open knowledge.worldbank.org:
Implementation of Treasury Single Account and Strengthening of Cash Management
in Vietnam- Open Knowledge Repository Sailendra P. & Israel F. (2010).
Treasury Single Account: concept, design, and implementation Issues. IMF
working paper, WP/10/143. Schmitz, Stefan W. and Geoffrey E. Wood, (2006),
“Institutional Change in the Payments Systems and Monetary Policy – An
Introduction, “in Institutional Change in the Payment System and Monetary
Policy, ed. By Stefan W. Schmitz and Geoffrey E. Wood (Routledge) Sekaran, U.
and Bougie, R. (2010) Research Methods for Business: A Skill building Approach,
5 th ed. West Sussex, UK. John Wiley & Sons Lt Stephen, O. (2016). Treasury
Single Account: a catalyst for public financial management in Nigeria. A paper
presented at a workshop organized by Association of National Accountants of
Nigeria (ANAN), International Federation if Accountants (IFAC), Office of the
Accountant General of the Federation (OAGF) and the World Bank in Abuja.
Extracted from
www.thenationonlineng.net/treasury-singleaccount-a-catalyst-for-public-financial-management-in-nigeria/
Sun Editorial (2015), The new Treasury Single Account August 25, P 17 The
Stalwart Report. Extracted from web on:
http://thestelwartreport.com/understanding-the-treasury-singleaccount-tsa-system-things-you-should-know/
Vanguard Editorial (2015), Treasury Single Account: Bank deposits loss may hit
N2tr, August 17, p. 18 White, L. H. (2006). Payments System Innovations in the
United States since 1945 and their Implications for Monetary Policy,” Chapter 1
in Institutional Change in the Payment System and Monetary Policy, ed. by
Stefan W. Schmitz and Geoffrey E. Wood (Routledge). Yusuf, I. A and Chiejina,
N. (2015), “Anti-Graft War: One Economy, One Account”, Sunday Nation, August
16, Pp. 9 – 10 & 71.
REFERENCES
Akande,
L. (2015), “Buhari orders Federal Ministries, Agencies to open Treasury Single
Account”, Press Release, August 9 Agbakoba, O. (2016). Federal Government to
return all monies from the TSA to Banks. Premium newspaper, Sep. 28, P21 Ali
Hashim and Allister J. Moon, “Treasury Diagnostic Toolkit, Worldbank working
paper #19,2004 Biago Bossone and MassimoCirasino, The oversight of the payments
systems; A framework for the Development and Governance of payment systems in
Emerging Economies, worldbank Report, july 2001 Central Bank of Nigeria (2014),
“Communique No. 94 of the Monetary Policy Committee Meeting”, March 24- 25, pp
1 – 37 Collins, J. and Hussey, R. (2003) Business Research a practical guide
for undergraduate and Post-graduate students, 2 nd Ed. New York, Palgrave
Macmillan Eme, O. I., Emmanuel, N. I. and Chukwurah, D. C. (2015). Analysis of
pros and cons Treasury Single Account policy in Nigeria. Arabian Journal of
Business and Management Review (OMAN Chapter), Vol. 5, No. 4, Nov, 2015, Pp
20-39 Garbade, K. D. et.al, 2004). Fundamentals of Financial Management (11th
edition), Delhi: Pearson Education, Inc. James A. and Moses A. (2012). Impact
of Tax Administration on Government Revenue in a Developing Economy – A Case
Study of Nigeria. International Journal of Business and Social Science. Vol. 3
No 8, Pp 105 Larson, M. C. (2007). Local Government Cash Management, Chapter 2
in Local Public Financial Management, ed. by Anwar Shah, The World Bank.
Ocheni, K. D. (2016). Treasury Single Account: A catalyst for public financial
management in Nigeria. A paper presented at a workshop organised by Association
of National Accountants of Nigeria (ANAN), International Federation of
Accountants (IFAC), Office of the Accountant-General of the Federation (OAGF) and
The World Bank in Abuja Publication of Public Expenditure and Financial
Accountability (PEFA) Framework, May 2006. Open knowledge.worldbank.org:
Implementation of Treasury Single Account and Strengthening of Cash Management
in Vietnam- Open Knowledge Repository Sailendra P. & Israel F. (2010).
Treasury Single Account: concept, design, and implementation Issues. IMF
working paper, WP/10/143. Schmitz, Stefan W. and Geoffrey E. Wood, (2006),
“Institutional Change in the Payments Systems and Monetary Policy – An
Introduction, “in Institutional Change in the Payment System and Monetary
Policy, ed. By Stefan W. Schmitz and Geoffrey E. Wood (Routledge) Sekaran, U.
and Bougie, R. (2010) Research Methods for Business: A Skill building Approach,
5 th ed. West Sussex, UK. John Wiley & Sons Lt Stephen, O. (2016). Treasury
Single Account: a catalyst for public financial management in Nigeria. A paper
presented at a workshop organized by Association of National Accountants of
Nigeria (ANAN), International Federation if Accountants (IFAC), Office of the
Accountant General of the Federation (OAGF) and the World Bank in Abuja.
Extracted from
www.thenationonlineng.net/treasury-singleaccount-a-catalyst-for-public-financial-management-in-nigeria/
Sun Editorial (2015), The new Treasury Single Account August 25, P 17 The
Stalwart Report. Extracted from web on:
http://thestelwartreport.com/understanding-the-treasury-singleaccount-tsa-system-things-you-should-know/
Vanguard Editorial (2015), Treasury Single Account: Bank deposits loss may hit
N2tr, August 17, p. 18 White, L. H. (2006). Payments System Innovations in the
United States since 1945 and their Implications for Monetary Policy,” Chapter 1
in Institutional Change in the Payment System and Monetary Policy, ed. by
Stefan W. Schmitz and Geoffrey E. Wood (Routledge). Yusuf, I. A and Chiejina,
N. (2015), “Anti-Graft War: One Economy, One Account”, Sunday Nation, August
16, Pp. 9 – 10 & 71.
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