The study examined the implications of the implementation of the treasury single account policy on the performance of commercial banks in Nigeria. The study established that TSA is a unified structure of government bank accounts enabling consolidation and judicious management of government cash resources. The sample of the study comprised ten commercial banks in Nigeria namely Skye Bank, United Bank for Africa, Diamond Bank, First Bank, Fidelity Bank, Keystone Bank, Sterling Bank, Zenith Bank, Access Bank and Unity Bank. The data used in the study were computed from the annual financial reports of selected banks. The year 2015 was gauged as the benchmark, since TSA was implemented in that year. The years -2013 and 2014 constituted the pre-TSA period and the years- 2016 and 2017 constituted the post-TSA period. The performance comparison was based on four variables. Return on asset and return on equity were used to measure profitability; current ratio was used to measure liquidity and the ratio of non-performing loans to total loans and advances was used to measure loan performance. The independent t-test analysis was employed to compare the performance of selected banks before and after TSA implementation.The findings of the study revealed that: The average return on asset and return on equity of selected banks were higher in the pre-TSA period; The average current ratio of selected banks was higher in the pre-TSA period; The average ratio of non-performing loans to total loans was higher in the post-TSA period; There is no significant difference in the profitability of selected banks before and after the implementation of TSA (t=1.101; p>0.05); (t=1.401; p>0.05); There is no significant difference in the liquidity of selected banks before and after the implementation of TSA (t= 1.909; p>0.05); There is no significant difference in the loan performance of selected banks before and after the implementation of TSA (t= -0.738; p>0.05).The study concludes that the implementation of TSA has no significant influence on the performance of selected commercial banks in Nigeria.The study suggested that; Commercial banks should source funds from other sectors of the economy; TSA should be informed and guided by the availability of clear operational basis technology infrastructure that supports the implementation of the model of their choice; The Central Bank of Nigeria should go beyond the guidelines and put in place measures to correct any lapses of the policy both on the banking sector and the economy at large.
1.1 BACKGROUND OF 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 PROBLEM
Interest to carry out this study is born out of the opinion that commercial banks no longer operate at the same financial capacity as they used to before the implementation of section 80(1) of the 1999 constitution as amended of the Federal Republic of Nigeria which states that all revenue or other moneys raised or received by government ministries, departments and agencies be paid into a consolidated revenue fund of the Federation, an account held at the Central Bank of Nigeria. Looking at the lending ratio and capacity of commercial banks and the interest to be paid on money lent from commercial banks and also the last two financial statements of commercial banks over the last two years, which do show a lesser profit and cash reserve when compared to the financial statement before the implementation of section 80(1) of the 1999 constitution as amended. This is because, government funds previously deposited in commercial banks by MDAs, that could have been used by commercial banks to generate more financial wealth for themselves, is no longer available, as all government funds generated must be transferred daily into to the treasury single account held at the Central Bank of Nigeria. With this recent development, commercial banks are being forced to find other means and methods of generating cash reserves, financial wealth and increase in profit to satisfy its shareholders. The banks are being forced to increase their interest on loans, making borrowing difficult and almost impossible for some and as the usual practise of most commercial banks; their marketers are being burdened with heavy responsibility of attracting huge deposits and wealthy customers to bank with them within a stipulated period of time or risk losing their jobs. The aftermath of the implementation of the Treasury Single Account on commercial banks performance in Nigeria is the reason for this research work.
1.3 RESEARCH QUESTIONS
The study will be answering the following research questions so as to ascertain the objectives of the research. The research questions are as follows;
- What are the roles of commercial banks in the implementation of the Treasury Single Account?
- What is the effect of Treasury Single Account on commercial banks liquidity?
- What is the effect of Treasury Single Account on commercial banks profitability?
- What is the effect of Treasury Single Account on commercial banks loan performance?
- What are the factors affecting the implementation of Treasury Single Account in commercial banks?
1.4 OBJECTIVES OF THE STUDY
The main aim of the research work is to determine the effect of treasury single account on the performance of Nigerian commercial banks. The other objectives of the study include the following;
- To identify the roles of commercial banks in the implementation of the Treasury Single Account.
- To evaluate the effect of Treasury Single Account on commercial banks liquidity.
- To evaluate the effect of Treasury Single Account on commercial banks profitability.
- To determine the effect of Treasury Single Account on commercial banks loan performance.
- To identify the factors affecting the implementation of Treasury Single Account in Nigerian commercial banks.
1.5 STATEMENT OF RESEARCH HYPOTHESES
Hypothesis Ӏ: The implementation of treasury single account has no significant impact on the liquidity of commercial banks in Nigeria
Hypothesis ӀӀ: The implementation of treasury single account has no significant impact on the profitability of commercial banks in Nigeria
Hypothesis ӀӀӀ: The implementation of treasury single account has no significant impact on the loan performance of commercial banks in Nigeria
1.6 SIGNIFICANCE OF STUDY
The study of the implication of treasury single account on the performance of commercial banks in Nigeria 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 STUDY
The study on the implication of treasury single account on the performance of commercial banks in Nigeria will be limited to commercial banks in Nigeria from year 2013 to current date, 2107. The researcher will be comparing the performance of commercial banks before the implementation of TSA and their performance after the implementation of TSA. Quarterly reports of these banks, during this period will be used, as a time series analysis.
The sample design for the research work is the quoted commercial banks in Nigeria and the sample size for the research work is ten (10) 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; Skye Bank Plc, United Bank for Africa Plc, Diamond Bank Plc, First Bank of Nigeria Plc, Fidelity Bank Plc, Keystone Bank Plc, Sterling Bank Plc, Zenith Bank Plc, Access Bank Plc, Unity Bank Plc.
1.8 LIMITATION OF THE STUDY
In line with the fact that the treasury single account system is an old concept as it is stated in section 80 (1) of the 1999 Constitution (as amended) of a necessity, but the concept is only new in implementation, fully implemented by the current administration of government.
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.
Transparency: a positive and clear view of financial statement of Nigeria.
MDAs: ministries, departments and agencies of the Federation.
A Treasury Single Account (TSA) is a unified structure of government bank accounts that gives a consolidated view of government cash resources. Based on the principle of unity of cash and the unity of treasury, a TSA is a bank account or a set of linked accounts through which the government transacts all its receipts and payments (Lienert, 2009).
2.1.1 Treasury Single Account (TSA) in Nigeria