Treasury Single Account and Financial Performance in Money Deposit Banks in Nigeria
Chapter One
Objective of the study
The objectives of the study are;
- To establish the correlation between deposit money banks (DMBs) performance and public sector funds.
- To determine what effect, the TSA initiative has on the liquidity of DMBs.
- To discover the effect of the TSA policy on risk assets creation in the Nigerian banking industry.
CHAPTER TWO
REVIEWED OF RELATED LITERATRURE
The Concept of TSA
As a concept, TSA is a unified structure of government bank account that gives a consolidated view of government cash resources taking advantage of information communication technology (ICT). This could be one account or several accounts connected to a main account through which government transacts all its collection and disbursement of funds. The concept is based on the fact that cash is fungible and therefore need not be allocated along the reporting or control line of personnel costs, overhead costs and capital if efficiency is to be achieved. The accounting system for reporting and control purposes should rather distinguish individual cash transactions. (Zubairu, 2015). In processing transaction under a TSA regime, the Office of the Accountant-General of the Federation can carry out all payments centrally (centralised transaction processing system) or it can be done at the MDA levels (decentralised transaction processing system).
The CBN acts as the fiscal agent of the government, and consequently, the custody of the TSA in Nigeria is with it, although in theory, the main account of a TSA system may also be held at a DMB. In fact, there is no realistic alternative for economies without a well-developed deposit money banking system. In practice, the government banking arrangements may consist of several bank accounts which can be at both the central bank and DMBs. However, the balances in DMBs should be cleared every day and all government cash balances should be consolidated in one central account, which is the TSA main account of the Treasury at the central bank. (Pattanayak & Fainboim, 2010)
Main Features of TSA
The common features of TSA are:
- Unified bank accounts arrangement that enables the Office of the Accountant-General of the Federation, along with the Ministry of Finance, monitor flows in-and-out of government bank account and have a consolidated view of government cash position at any given time.
- No other government agency operates bank accounts outside the Office of the Accountant-General of the Federation, which is the Chief Finance Agent of Government.
- It covers all MDAs budgetary and extra budgetary funds so as to ensure full consolidation of government cash resources.
- Revenue and expenditure are classified using a well-developed Chart of Accounts that enables sub-ledger controls to be maintained for each MDA‘s transactions.
- It leverages on ICT for its operation and this facilitates automatic consolidation.
TSA in Nigeria
Treasury Single Account (TSA) is a prominent financial policy implemented by the Federal Government of Nigeria in 2015, to unify all the revenues from all the Ministries, Departments, and Agencies (MDAs) in the country by way of deposit into DMBs traceable into a single account at the Central Bank of Nigeria. The policy was introduced to significantly cut down the proliferation of bank accounts operated by MDAs and also bring about transparency and accountability, which consequently reduces corruption among all organs of the government. (Kanu, 2016)
CHAPTER THREE
METHODOLOGY
STUDY DESIGN
This work employs the historical research design to collect and synthesize evidences from the past in order to establish facts that lead to the acceptance or rejection of its hypotheses. It uses secondary sources and, as a result, the relevant data required for analysis are extracted from various financial statements of the DMBs included in the sample taken.
POPULATION OF THE STUDY
The population of this study comprises the 22 DMBs licensed by the CBN to operate in Nigeria based on international, national, regional and national non-interest banking authorizations. As captured by Magaji (2016), the internationally authorized DMBs include: Access Bank Plc, Diamond Bank Plc, Fidelity Bank Plc, First City Monument Bank Plc, First Bank Nigeria Limited, Guaranty Trust Bank Plc, Skye Bank Plc, Union Bank of Nigeria Plc, United Bank of Africa Plc and Zenith Bank Plc. Those DMBs authorised to operate nationally are: Citibank Nigeria Limited, Ecobank Nigeria Plc, Heritage Bank Limited, Keystone Bank Limited, Stanbic IBTC Bank Plc, Standard Chartered Bank Limited, Sterling Bank Plc, Unity Bank Plc and Wema Bank Plc. The regionally authorised DMBs are: Suntrust Bank Nigeria Limited and Providus Bank Plc. Lastly, Jaiz Bank Limited is the only non-interest (Islamic) banking institution operating in Nigeria on national basis
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
In this research work, the TSA has estimated public sector deposits as its proxy, and the two calculated indices of the performance of the DMBs are the Net Interest Margin (NIM) and Return on Assets (ROA), all of which herein, are presented for the purpose of analysis. Other research data presented are the cash balances of the DMBs which measure their liquidity and customers‘ deposits, from which the DMBs create risk assets.
CHAPTER FIVE
CONCLUSION AND RECOMMENDATION
This study‘s findings make it clear that there was a change in the operations of Deposit Money Banks owing to the introduction of the Treasury Single Account. The effects uncovered in the findings of this research work are proofs that the banks were significantly reliant on public sector funds, absence of which negatively affected different aspects of their operations and performance indicators. Banks used to keep their profit machines churning by fuelling them using idle funds deposited by Ministries, Departments, and Agencies, while in contrast, these Ministries, Departments and Agencies piled up losses due to unnecessary costs of borrowings from the DMBs. The ability of the financial institutions to lend, according the findings, appears to be unaffected by the TSA, as seen in the positive form of the correlation between them and this is why some of the banks had increase in amounts of money given out as loans and advances, and customers‘ deposits, before and after the implementation of the TSA.
Recommendation
Based on the findings of the study, the researcher recommends the following:
- The Deposit Money Banks should continually introduce new and innovative products and services to make up for the departure of public sector fund and in order to increase returns. Doing this will give them global competitive edge especially in the current trend of financial technology and the gradual paradigm shift towards virtual banking. The soundness and global competitiveness of the Deposit Money Banks in Nigeria are likely going to depend on their proactive attitude towards adopting and taking advantage of financial technology innovations which would be brought about by the change in the future of banking, globally.
- The Central Bank of Nigeria should go beyond guidelines to address the negative influence of the TSA implementation on the liquidity base of Deposit Money Banks by putting in place necessary arrangements in that regard. Additionally, the banks on their own part should strategize in such a way that sources of liquidity other than public sector funds are maximally explored and leveraged. A huge number of the population of Nigeria is still unbanked, therefore, acting in line with this recommendation will not only boost the liquidity of banks but also foster financial inclusion.
- Deposit mobilization strategies should be further strengthened by the Deposit Money Banks. Institutional investors such as Pension Fund Administrators (PFA) and insurance companies should be well-targeted in this regard. This can be achieved by making the returns on term deposits attractive enough to convince prospective depositors that they are better off with it than investing in risk-free instruments such as bonds and treasury bills.
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