Abstract
This study examined the impact of Treasury Single Account (TSA) on performance of Deposit Money Banks (DMBs) in Nigeria. The study adopts a descriptive and comparative study approach. The data were collected from quarterly financial statement reports of fourteen (14) sampled DMB’s and were analysed using descriptive statistics and paired sample t- test techniques. The result reveals that there is significant difference in bank liquidity, deposit mobilization and loan and advances of DMBs after the implementation of TSA in Nigeria and the difference in the change in liquidity level between international authorised DMB’s and national authorised DMB’s is significant after adoption of TSA in Nigeria. The findings also show that there is insignificant difference in profitability and the difference in the change in Deposit mobilization between international DMB’s and national DMB’s is insignificant after TSA adoption in Nigeria. The study concludes that there is a difference in bank performance aft TSA in Nigeria. Therefore, it is recommended that Managers of DMBs should effectively embrace the bank business core values by deploying effective modalities to extend their sources of funds to other sectors of the economy to avoid over-reliance on government funds and put in place effective measures to collect depositors’ funds so as to improve the bank deposit, liquidity, loan and advances to customers and profitability in Nigeria.
Key words: Treasury single account (TSA), Liquidity, Deposit Mobilization, National and International Authorized Deposit Money Banks, Nigeria.
Introduction
The banking sector is critical to every nation’s economy in the world. It occupies a central position in the country’s financial system and also serves as an indispensable agent in the growth and development process of any nation by intermediating between the surplus and deficit savings’ units within an economy. This enables Banks to mobilize and facilitate efficient allocation of national savings, thereby boosting the level of investments and enhance national growth (Adeolu, 2015). The extent of this at any point in time depends on how stable, efficient and effective their banking sector is in the allocation of scarce resources accruable from deposit of individual, corporate organizations and the government (Surplus units) to deficits units of the economy.
The extent to which banks effectively perform this notable task will depend on the strength of the banking sector. In order to strengthen the banking sector, government financial system and the nation’s economy generally the government over the years introduces various financial reforms in the sector and within the government that may have impact on the banks and the environment. The reforms are aimed at improving efficiency as well as how government business is being done in Nigeria. One of such reforms is the
Treasury Single Account (TSA) which is a form of public accounting system where all government revenue, expenses and profits are paid into a single account, that is maintained by the country’s Central Bank and all payments are made through that account. This is to ensure accountability of government revenue, enhance transparency and prevent abuse of public funds. Odewule (2016) argued that the TSA policy was introduced to reduce the proliferation of bank accounts operated by MDAs, curb some irregularities, and promote transparency and accountability among all organs of the government.
This is because many emerging markets and other low-income countries have fragmented systems for handling government receipts and payments before the introduction of TSA. In Nigeria for instance, the fragmented system of maintain accounts caused the ministry of finance or treasury to lacks a unified view and centralized control over government’s cash resources at any point in time. The idle cash with MDA’s in their several bank accounts for prolonged periods while they still continue to borrow to execute projects and finance budget deficit and operations (Obinna, 2015, Okechukwu, Chukwurah & Daniel 2015; Oyedele, 2015; Oyeode, 2016). This resulted in leakages of funds, embezzlement of funds, inadequate budgetary and financial planning. The situation become worst as most MDA’s use part of the generated funds to finance their operation and remitted the residual to the federation account because of the fragmented banking arrangement for revenue and payment of transactions prior to TSA in Nigeria.
The highest beneficiaries of the situation where the MDAs maintain several accounts are the banks. This is because the banks may depend on such deposits from government agencies to improve their liquidity, level of deposit and provide loans and advances back to the government and its MDAs at high interest rates so as to improve their performance (Okwe, Chijioke, Temiloluwa & David, 2015). The banks maintain a good liquidity, deposit growth and overall performance even when they still operate “arm chair banking” and are no longer aggressive to mobilized funds from the other sectors of the economy. This is because they depend on Public Sector Funds which constitute a greater percentage of their deposits and some of the bank lack ability to effectively generate deposits outside the Government.
However, the implementation of TSA will reduce the number of government accounts and funds available in the banking sector which invariably may affect the banks liquidity, deposit level, loan and advances to the Nigerian Economy and the bank profitability. The previous studies available look at the effect of TSA on liquidity and others studies on profitability but there is need for a study to examine the influence of TSA on all the variables together. This is because whatever affect the bank deposit level may also affect its liquidity, loan and advances to customers and the profitability of the bank.
The available studies that examine the effect of TSA on the bank performance particularly its Liquidity failed to ascertain whether these effects vary between National banks and International banks based on their operational coverage. Though the extent of the impact or effect may vary based on banks attributes such as their operation coverage because, banks that operates at international level may be able to easily gain
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