THE EFFECT OF TREASURY SINGLE ACCOUNT ON THE ECONOMY OF NIGERIA

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THE EFFECT OF TREASURY SINGLE ACCOUNT ON THE ECONOMY OF NIGERIA

CHAPTER ONE

INTODUCTION

1.1 BACKGROUND OF STUDY

The Treasury Single Account (TSA) policy came into being by the federal government of Nigeria to minimize or completely block all financial leakages in other to promote transparency and to reduce the level of mismanagement of government’s revenue, the essence of treasury single account is majorly to bring all government accounts together; with this there will be a limited amount of revenue loss and mismanagement by the revenue generating agencies in Nigeria.

The idea of treasury single account by the federal government of Nigeria came into full existence when some agencies refused to declare and remit the agreed 25 percent of their annual revenue they generated to the treasury as demanded by law. The refusal to remit these funds has effect on the economy of Nigeria.

As at 2012 about N120 billion was forcefully collected by the federal government of Nigeria from MDAs being 25 percent of their gross revenue to the treasury also another N34 billion was collected as at the year 2013. Before this time most of the MDAs were very reluctant to remit the required amount as requested by the federal government of Nigeria to treasury by law. According to (Daily Trust Editorial, 2015:16) defined treasury Single Account is a kind of public accounting system through which all government revenue, all receipts and all the income are collected into one single account, which is usually maintained and managed by the country’s Central Bank not only that; all payment are done virtually through this account. The primary purpose of this is to ensure accountability of government revenue, enhance transparency and avoid misappropriation of public funds. The management and maintenance of a Treasury Single Account will help to ensure proper cash management by completely eliminating all in active funds that are left with different commercial banks in Nigeria and in a way to improve on the reconciliation of revenue collection and payment according to (Adeolu, 2015).

The continuous revenue mobilization and the Nigeria fiscal commission released a complete audit report that showed that some banks are withholding a huge amount of about N12 billion revenue that are collected for the Nigerian customs service and the federal inland revenue service.

According to the Director, Corporate Communications Department of the Central Bank of Nigeria, Ibrahim Muazu said that the TSA as the federal government policy is part of the national payment initiative that aimed at modernizing the Nigeria payment system. MDAs are complying and it is going to have positive impact on the economy.

1.2 STATEMENT OF PROBLEM

The order by the President of the federal republic of Nigeria was that all revenues due to the Federal Government or any of the agencies of the federal government of Nigeria must be paid into the treasury single account and maintained by the central bank of Nigeria (CBN). The idea seems a welcome development in Nigeria as it aimed at fighting fraud and the level of corruption in Nigeria. Corruption has become a major issue in the growth and development of the Nigeria economy. Nigeria is a country that is blessed with good resources but due to the high level of corruption, the country loos very poor. According to the director of center for social justice, a civil society group based in Abuja by name Eze Onyekpere defined TSA as a process and as a tool for the effective and efficient management of the finances, banking and cash position of the federal government of Nigeria. Eze Onyekpere stated again that it pools and unifies all government accounts through a single treasury account. Among the issue of treasury single account there are some other advantages which are legion.

The consolidation into TSA made it possible for the timely capture and payment of all revenue due to the federal government into the government coffers without the intermediation arrangement of multiple banking (Vanguard Editorial ,2015) Notwithstanding some of the worries raised against the TSA issues and prospects, most Nigerians seem to be pleased with the implementation of TSA. It is widely believed that business entrepreneur that the scattering of government funds in different commercial banks serve as a conduit for the continuous fraudulent activities by government officials in the MDAs according to John Ocheni. The peoples thought about this new method, is that the leakages would be blocked and openness and accountability enhanced in the running of government businesses. This leakages that used to be there in the system where most people used money as they want and decided what to return and when to return the money to the government will no more be there. With this there will be a better control and management of government revenue.

1.3 AIM AND OBJECTIVES OF STUDY

The objectives of the research work are to solve the above stated problem and to help the federal government of Nigeria on policy generation and decision making; some of the objectives are stated as:

To determine the extent to which TSA can prevent financial leakages, to increase transparency and proper accountability in the public financial management.

To determine the effect of TSA on the economy of Nigeria

To determine the relationship between TSA and public financial management

To examine the role of TSA in the blockage of financial leakages

1.4 RESEARCH QUESTION

To achieve the above stated objectives the study came up with following research questions:

To what extent can TSA prevent financial leakages, to increase transparency and proper accountability in the public financial management?

What is the effect of TSA on the economy of Nigeria?

What is the relationship between TSA and public financial management?

What are the roles of TSA in the blockage of financial leakages?

1.5 RESEARCH HYPOTHESIS

Hypothesis 1

H0: TSA has no significant effect on the economy

H1: TSA has significant effect on the economy

Hypothesis 2

H0: TSA does not prevent financial leakage and promote transparency and accountability in public management

H1: TSA does not prevent financial leakage and promote transparency and accountability in public management

1.6 SIGNIFICANCE OF STUDY

The study will be of immense benefit to both researchers, the federal government of Nigeria in policy generation and decision making, the study will also reveal the nature of the relationship between TSA and the Nigeria economy; it will discuss the role of TSA in financial management; finally the study will show the effect of TSA on the Nigeria economy.

1.7 SCOPE OF STUDY

The study will focus on the effect of treasury single account on the economy of Nigeria.

1.8 LIMITATION OF STUDY

FINANCIAL CONSTRAINTS: financial constraints tends to impede the speed of the research student to buy materials and visit other areas of the federal government sector to get information and other materials concerning the research topic but the researcher was able to get meaningful information concerning the research topic.

TIME CONSTRAINTS: this researcher still being a student must be involved in one or two departmental activities like seminar presentation, submission of assignment, attendance to lectures etc but the researcher was able to meet up with the time allocated for the completion of the research work.

1.9 DEFINITION OF TERMS

TSA: Treasury single account is a financial policy introduced by the federal government of Nigeria in 2012 to consolidate all inflows 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.

TRANSPARENCY: a positive and clear financial statement of Nigeria

FINANCIAL LEAKAGES: refers to outflow from a circular flow of income model. In a two sector model, all individual income is sent back to employers when goods and services are purchased, and back to employees through wages and dividends. Leakage occurs when income is taken out through taxes, savings and imports.

PUBLIC FINANCE: is the study of the role of the government in the economy. It is the branch of economics which assesses the government revenue and government expenditure of the public authorities and the adjustment of one or the other to achieve desirable effects and avoid undesirable ones.

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