Project Abstract

Project Overview

<p> <b></b></p><p><b><b>INTRODUCTION</b></b></p><p><b><b></b></b></p><b><b><p><b>1.1 &nbsp; BACKGROUND TO THE STUDY</b></p><p><b></b></p><b><p>Treasury<br>Single Account is a public accounting system under which all government<br>revenue, receipts and income and collected into one single account, usually<br>maintained by the country’s Central Bank and all payments done through this<br>account as well. The purpose is primarily to ensure accountability of<br>government revenue, enhance transparency and avoid misapplication of public<br>funds. The maintenance of a Treasury Single Account will help to ensure proper<br>cash management by eliminating idle funds usually left with different<br>commercial banks and in a way enhance reconciliation of revenue collection and<br>payment (Adeolu, 2016).</p><p>Section 80<br>(1) of the 1999 Constitution as amended states “All revenues,<br>or other moneys raised or received by the Federation (not being revenues or<br>other moneys payable under this Constitution or any Act of the National<br>Assembly into any other public fund of the Federation<br>established for a specific purpose) shall be paid into and form one<br>Consolidated Revenue Fund of the Federation”; successive governments have<br>continued to operate multiple accounts for the collection and spending of<br>government revenue in flagrant disregard to the provision of the constitution<br>which requires that all government revenues be remitted into a single account.<br>It was not until 2012 that government ran a pilot scheme for a single account<br>using 217 ministries, department and agencies as a test case. The pilot scheme<br>saved Nigeria about N500 billion in frivolous spending. The success of the<br>pilot scheme motivated the government to fully implement TSA, leading to the<br>directives to banks to implement the technology platform that will help<br>accommodate the TSA scheme. The recent directives by President Mohammed Buhari<br>that all government revenues should be remitted to a Treasury Single Account is<br>in consonance with this programme and in compliance with the provisions of the<br>1999 constitution (CBN, 2016).</p><p>The Central Bank has<br>opened a Consolidated Revenue Account to receive all government revenue and<br>effect payments through this account. This is the Treasury Single Account. All<br>Ministries, Departments and Agencies are expected to remit their revenue collections<br>to this account through the individual commercial banks who act as collection<br>agents. This means that the money deposit banks will continue to maintain<br>revenue collection accounts for Ministries, Departments and Agencies but all<br>monies collected by these banks will have to be remitted to the Consolidated<br>Revenue Accounts with the CBN at the end of each banking day. In other words,<br>Ministries, Departments and Agencies accounts with money deposit banks must be<br>zerorized at the end every banking day by a complete remittance to the Treasury<br>Single Account of all revenues collected. The implication is that banks will no<br>longer have access to the float provided by the accounts they maintained for<br>the Ministries, Departments and Agencies. Difference types of account could be<br>maintained under a Treasury Single Account arrangement and these may include<br>the TSA main account, subsidiary or sub-accounts, transaction accounts and zero<br>balance account. Other types of accounts that could operated include imprest<br>accounts, transit accounts and correspondence accounts. These accounts are<br>maintained for transaction purposes for funds flowing in and out of the Treasury<br>Single Account (Adeolu, 2016). &nbsp;</p><p>From the foregoing,<br>it is obvious that the primary benefit of a Treasury Single Account is the<br>mechanism it provides for proper monitoring of government receipts and<br>expenditure. In the Nigerian case, it will help to block most if not all the<br>leakages that have been the bane of the growth of the economy. We have a<br>situation where some Ministries, Departments and Agencies manage their finances<br>like independent empire and remit limited revenue to government treasuries.<br>Under a properly run Treasury Single Account, this is not possible as agencies<br>of government are meant to spend in line with duly approved budget provisions.<br>The maintenance of a single account for government will enable the Ministry of<br>Finance monitor fund flow as no agency of government is allowed to maintain any<br>operational bank account outside the oversight of the ministry of finance.</p><p>As a matter of fact,<br>deposit money banks stand to lose immensely from the implementation of Treasury<br>Single Account. This is because of the fact that public sector funds<br>constitute a large chunk of commercial banks deposit. Indeed, it is<br>estimated that commercial banks hold about N2.2 trillion public sector funds at<br>the beginning of sector quarter of 2016. The impact of this amount of<br>money leaving the system can be imagined when one considers the fact that each<br>time the monthly federal allocation is released, the banking system is usually<br>awashed with liquidity and as soon as this public sector funds dries up through<br>withdrawal by the states, liquidity tightens again with interbank rates going<br>up. Of major impact will be the movement of funds of revenue generating<br>parastatals such as the NNPC, out of commercial banks.</p><p><b>1.2 &nbsp; STATEMENT OF THE PROBLEM</b></p><p><b></b></p><b><p>As the Federal<br>government of Nigeria introduces Treasury Single Account, Banks will continue<br>to device means of mobilizing funds from the private sector. We see a<br>return of the era when women are employed by banks specifically for deposit<br>mobilization and tacitly encouraged to use any means necessary to get<br>funds. We see increase in deposit interest rates as a major means of inducing<br>customers and most importantly we see a drop in lending and in the<br>profitability of banks, at least, in the short to medium term until they fully<br>come to terms with the impact of the policy and begin to properly position<br>themselves for true banking business. Ultimately, we see the share price<br>of these banks falling as investors attempt to price in the policy impact.<br>However, the implementation of this programme is a critical step towards<br>curbing corruption in public finance. This is a tool to combat corrupt practices,<br>eliminate indiscipline in public finance and ensure adequate fund flow that<br>will be channeled to critical sectors of the economy to catalyze development.</p><p><b>1.3 &nbsp; OBJECTIVES OF THE STUDY</b></p><p><b></b></p><b><p>The<br>following are the objectives of this study:</p><p>1. To<br>examine the implications of Treasury Single Account in developing economies.</p><p>2. To<br>identify the benefits of Treasury Single Account.</p><p>3. To<br>examine the challenges of treasury single account.</p><p>4. To<br>study the prospects of treasury single account.</p><p><b>1.4 &nbsp; RESEARCH QUESTIONS</b></p><p><b></b></p><b><p>1. What<br>are the implications of Treasury Single Account in developing economies?</p><p>2. What<br>are the benefits of Treasury Single Account?</p><p>3. What<br>are the challenges of implementation of treasury single account?</p><p>4. What<br>are the prospects of treasury single account?</p><p><b>1.6. RESEARCH HYPOTHESIS</b></p><p><b></b></p><b><p>Ho:<br>The application of treasury single account is not good for a developing economy<br>like Nigeria.</p><p>Hi:<br>The application of treasury single account is good for a developing economy<br>like Nigeria.</p><p><b>1.7 &nbsp; SIGNIFICANCE OF THE STUDY</b></p><p><b></b></p><b><p>The<br>following are the significance of this study:</p><p>1. The<br>results from this study will educate the general public on the benefits of<br>Treasury Single Account to the developing economy of the country. It will also<br>educate on its temporary effect on the banking industry as huge sum of money<br>will be leaving the sector suddenly.</p><p>2. This<br>research will also serve as a resource base to other scholars and researchers<br>interested in carrying out further research in this field subsequently, if<br>applied will go to an extent to provide new explanation to the topic.</p><p><b>1.8 &nbsp; SCOPE/LIMITATIONS OF THE STUDY</b></p><p><b></b></p><b><p><b>LIMITATION OF STUDY</b></p><p><b></b></p><b><p><b>Financial constraint</b>– Insufficient fund tends to impede the efficiency of the<br>researcher in sourcing for the relevant materials, literature or information<br>and in the process of data collection (internet, questionnaire and interview).<b></b></p><b><p><b></b></p><b><p>&nbsp;<b>Time constraint</b>– The researcher will<br>simultaneously engage in this study with other academic work. This consequently<br>will cut down on the time devoted for the research work.</p><p><b></b></p><b><p><b>&nbsp;</b></p><p><b></b></p><b><p><b>REFERENCES</b></p><p>Adeolu I. A. (2016). <i>Understanding The<br>Treasury Single Account (TSA) System – Things You Should Know</i>. &nbsp; Business &amp; Economy, Market Development.</p><p>CBN (2016) “Revised Guidelines for compliance with Treasury<br>Single Account by Banks in Nigeria</p></b></b></b></b></b></b></b></b></b></b></b></b></b></b> <br><p></p>