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IMPLICATION
OF TREASURY SINGLE ACCOUNT ON BANKING SECTOR OF NIGERIA AND THE ECONOMY AS A
WHOLE
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Treasury
Single Account is a public accounting system under which all government
revenue, receipts and income and collected into one single account, usually
maintained by the country’s Central Bank and all payments done through this
account as well. The purpose is primarily to ensure accountability of
government revenue, enhance transparency and avoid misapplication 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).
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 other public fund of the Federation established
for a specific purpose) shall be paid into and form one Consolidated Revenue
Fund of the Federation”; successive governments 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 revenues be remitted into a single account. It was not until 2012
that government ran a pilot scheme for a single account using 217 ministries,
department 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 directives to banks to
implement the technology platform that will help accommodate the TSA scheme.
The recent directives 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).
The Central
Bank has opened a Consolidated Revenue Account to receive all government
revenue and effect payments through this account. This is the Treasury Single
Account. All Ministries, Departments and Agencies are expected to remit their
revenue collections to this account through the individual commercial banks who
act as collection agents. This means that the money deposit banks will continue
to maintain revenue collection accounts for Ministries, Departments and
Agencies but all monies collected by these banks will have to be remitted to
the Consolidated Revenue Accounts with the CBN at the end of each banking day.
In other words, Ministries, Departments and Agencies accounts with money
deposit banks must be zerorized at the end every banking day by a complete
remittance to the Treasury Single Account of all revenues collected. The
implication is that banks will no longer have access to the float provided by
the accounts they maintained for the Ministries, Departments and Agencies.
Difference types of account could be maintained under a Treasury Single Account
arrangement and these may include the TSA main account, subsidiary or
sub-accounts, transaction accounts and zero balance account. Other types of
accounts that could operated include imprest accounts, transit accounts and
correspondence accounts. These accounts are maintained for transaction purposes
for funds flowing in and out of the Treasury Single Account (Adeolu,
2015).
From the
foregoing, it is obvious that the primary benefit of a Treasury Single Account
is the mechanism it provides for proper monitoring of government receipts and
expenditure. In the Nigerian case, it will help to block most if not all the
leakages that have been the bane of the growth of the economy. We have a
situation where some Ministries, Departments and Agencies manage their finances
like independent empire and remit limited revenue to government treasuries.
Under a properly run Treasury Single Account, this is not possible as agencies
of government are meant to spend in line with duly approved budget provisions.
The maintenance of a single account for government will enable the Ministry of
Finance monitor fund flow as no agency of government is allowed to maintain any
operational bank account outside the oversight of the ministry of finance.
As a matter
of fact, deposit money banks stand to lose immensely from the implementation of
Treasury Single Account. This is because
of the fact that public sector funds constitute a large chunk of commercial
banks deposit. Indeed, it is estimated
that commercial banks hold about N2.2 trillion public sector funds at the
beginning of sector quarter of 2015. The
impact of this amount of money leaving the system can be imagined when one
considers the fact that each time the monthly federal allocation is released,
the banking system is usually awashed with liquidity and as soon as this public
sector funds dries up through withdrawal by the states, liquidity tightens
again with interbank rates going up. Of
major impact will be the movement of funds of revenue generating parastatals
such as the NNPC, out of commercial banks.
1.2 STATEMENT OF THE 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
following are the objectives of this study:
To examine the implications of Treasury
Single Account on the banking sector in Nigeria.
To examine the implications of Treasury
Single Account on the economic development in Nigeria.
To identify the benefits of Treasury Single
Account.
1.4 RESEARCH QUESTIONS
What are the implications of Treasury
Single Account on the banking sector in Nigeria?
What are the implications of Treasury
Single Account on the economic development in Nigeria?
What are the benefits of Treasury Single
Account?
1.6 SIGNIFICANCE OF THE STUDY
The
following are the significance of this study:
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.
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.
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