Prospects And Challenges Of Treasury Single Account In A Developing Economy

Project and Seminar Material for Accountancy / Accounting

Prospects And Challenges Of Treasury Single Account In A Developing Economy


Abstract


This study examined the nature, origin, challenges and lesion for Nigerian experience of the Treasury Single Account. According to the adoption of a Treasury Single Account (TSA) by the federal and some state governments is seen by many as aimed at plugging loopholes in the Nigerian Financial System. The total population for the study is 200 staff of CBN, Lagos state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up economists, investment and risk analysts, human resource managers and accountants were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies


Chapter One


Introduction

1.1 Background to the Study

A treasury single account (TSA) is an essential tool for consolidating and managing governments’ cash resources, thus minimizing borrowing costs. In countries with fragmented government banking arrangements, the establishment of a TSA should receive priority in the public financial management reform agenda (IMF, 2011). Government banking arrangements are an important factor for efficient management and control of government’s cash resources. Such banking arrangements should be designed to minimize the cost of government borrowing and maximize the opportunity cost of cash resources. This requires ensuring that all cash received is available for carrying out government’s expenditure programs and making payments in a timely fashion. Many emerging market and developing countries have fragmented systems for handling government receipts and payments (Adeolu, 2015). In these countries, the ministry of finance/treasury lacks a unified view and centralized control over government’s cash resources. As a result, this cash lies idle for extended periods in numerous bank accounts held by spending agencies while the government continues to borrow to execute its budget. A government lacking effective control over its cash resources can pay for its institutional deficiencies in multiple ways. First, idle cash balances in bank accounts often fail to earn market-related remuneration. Second, the government, being unaware of these resources, incurs unnecessary borrowing costs on raising funds to cover a perceived cash shortage. Third, idle government cash balances in the commercial banking sector are not idle for the banks themselves, and can be used to extend credit. Draining this extra liquidity through open market operations also imposes costs on the central bank. Establishing a unified structure of government bank accounts via a treasury single account (TSA) will solve these problems, improving cash management and control. It should, therefore, receive priority in any public financial management reform agenda. A TSA also facilitates better fiscal and monetary policy coordination as well as better reconciliation of fiscal and banking data, which in turn improves the quality of fiscal information. Finally, the establishment of an effective TSA significantly reduces the debt servicing costs (IMF, 2011). A 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. The principle of unity follows from the fungibility of all cash irrespective of its end use. While it is necessary to distinguish individual cash transactions for control and reporting purposes, this purpose is achieved through the accounting system and not by holding/depositing cash in transaction specific bank accounts. This enables the treasury to delink management of cash from control at a transaction level. Recently in year 2015, the new elected president of Nigeria, Mohammadu Buhari has introduced and enforced compliance with Treasury single account in the country with the use of REMITA. Nigeria are of divergent opinion as some has hailed the development while other has continued to criticize it. However, this study is examining the prospects and challenges of Treasury Single account in Nigeria.


1.2 Statement of the Problem

Treasury single account TSA has a lot of prospects and challenges for developing economy. In practice, the government banking arrangements may consist of several bank accounts which can be at both the central bank and commercial banks. However, the balances in commercial banks should be cleared every day and all government cash balances should be consolidated in one central account—the TSA main account—of the treasury at the central bank. However, Issues related to cash management should not be confused with issues related to the distribution of responsibilities for accounting control and administration of the payment system. A TSA can operate with both centralized and decentralized (or deconcentrated) transaction processing and accounting control systems.


1.3 Objectives of the Study

The following are the objectives of this study:

  1. To examine the prospects of Treasury Single Account in a developing economy.
  2. To examine the challenges of Treasury Single Account in a developing economy.
  3. To identify the effectiveness of Treasury Single Account in Nigeria.

1.4 Research Hypotheses

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

  1. H0: there are no prospects of Treasury Single Account in a developing economy.
    H1: there are no prospects of Treasury Single Account in a developing economy
  2. H02: there are no challenges of Treasury Single Account in a developing economy
    H2: there are challenges of Treasury Single Account in a developing economy

1.5 Significance of the Study

The following are the significance of this study:

  1. The outcome of this study will educate the Nigeria populace on the prospects and challenges of Treasury Single Account TSA on Nigerian economy.
  2. This research will be a contribution to the body of literature in the area of the effect of personality trait on student’s academic performance, thereby constituting the empirical literature for future research in the subject area.

1.6 Scope / Limitations of the Study

This study will cover the benefits and the limitations of Treasury single account on Nigeria economy

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.


1.7 Definition of Terms

Prospect:

The possibility or likelihood of some future event occurring.

Challenges:

A call to someone to participate in a competitive situation or fight to decide who is superior in terms of ability or strength

Treasury:

A treasury is either A government department related to finance and taxation. A place or Schatzkammer where currency or precious items like gold, diamonds etc are kept. The head of a treasury is typically known as a treasurer

Treasury Single Account:

A treasury single account (TSA) is an essential tool for consolidating and managing governments’ cash resources, thus minimizing borrowing costs

Developing Economy:

A developing economy also called a less developed economy or underdeveloped country is a nation with an underdeveloped industrial base, and a low Human


1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
  • Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study

Chapter Five


Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to ascertain prospect and challenges of treasury single account in a developing economy

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of treasury single account in a developing economy


5.2 Summary

This study was on prospect and challenges of treasury single account in a developing economy. Three objectives were raised which included: To examine the prospects of Treasury Single Account in a developing economy, to examine the challenges of Treasury Single Account in a developing economy, to identify the effectiveness of Treasury Single Account in Nigeria. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of CBN, Lagos state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up economists, investment and risk analysts, human resource managers and accountants were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies


5.3 Conclusion

The review for this study shows that Nigeria is a country with great potential and to achieve this, a vibrant, accountable and working Treasury Single Account is required to drive economic growth and development of the nation. Two main areas that would drive this are the Government and the Banking Sector. A developing country like Nigeria, banks play their traditional roles in addition to being used as vehicles for achieving developmental and social goals. Government agencies will need to work with the CBN in actualizing the proper disbursement of the huge resources allotted to the development funds created by Treasury Single Account on infrastructure, aviation, manufacturing and power. The peculiar nature of the environment requires a holistic approach to tackle the fundamental and inter-related and necessitates that several agencies work in a cohesive manner in the interest of the country.


5.4 Recommendation

Based on the literature reviewed, the following recommendation is made:

  1. A strict compliance with the directive on TSA by the relevant government organisations should be complied with to ensure that it contributes to the development of the economy.
  2. The financial regulators, including the CBN, should also be proactive and institute measures to correct any lapses or negative impact of the policy, as no law or measure is foolproof. The fear that it will negatively affect commercial banks, and possibly lead to massive job losses, should be addressed.
  3. There must be enhanced surveillance of the financial system to ensure strict observance of the recommendations of the Financial Action Task Force (FATF) by banks and other financial institutions in Nigeria
  4. Government, banks and members of the business community should be further educated on the positivity of the operation of the Treasury Single Account
  5. The federal government should initiate policies and various means to make sure that proper accounting of the funds into the Treasury Single Account follows due process and any subsequent foul play by any agencies, or even the CBN is duly prosecuted

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