The impact of treasury single account on financial performance of banks in nigeria before and after appraisal approach

Thesis Overview

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