THE EFFECT OF TREASURY SINGLE ACCOUNT ON FRAUD DETECTION AND PREVENTION IN NIGERIA

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THE EFFECT OF TREASURY SINGLE ACCOUNT ON FRAUD DETECTION AND PREVENTION IN NIGERIA

CHAPTER ONE

INTRODUCTION

BACKGROUND OF STUDY

The Nigeria economy has experienced so many declines lately due to high level of fraudulent activities in both the public and the state sector of Nigeria. The federal government of Nigeria has put in so much effort to resolve the effect of fraud on the economy of Nigeria; this was led to the introduction of the treasury single account.

The Federal Government of Nigeria has given directive that all revenue-generating agencies to close all their accounts with all the commercial banks by February 28, 2015 and to transfer same amount into a Consolidated Revenue Fund of the Federation and Treasury Single Account as a new electronic revenue collecting platform which was introduced recently by President Buhari has continued to generate debate across the country. There have been many speaking about the new policy by president Buhari on the issue of treasury single account in Nigeria.

However speaking on the feasibility of this system that was introduced, a Nigerian development economist and financial analyst by name Mr. Odilim Enwegbara, said there was need to overhaul the Fiscal Responsibility Act (FRA) of 2007 in a way that blocks the huge leakages caused by certain sections and subsections of the Act. There have been so many frauds that were pointed out by Mr Odilim; one of which is one committed by the Nigerian Communications Commission (NCC), it was discovered that there were two accounts one of the account has lower figures which was sent to the Fiscal Responsibility Commission (FRC) and the other with higher figures sent to the Office of the Auditor General of the Federation (OAGF).

Enwegbara in his work also cited the fraud discovered during a close examination of the Federal Inland Revenue Services (FIRS) presentation showing how in its 2009 audited accounts, N5.6 million was found in the audited account forwarded to FRC while N323 million was found in the same audited account it sent to the Office of the Auditor General of the Federation.

The effect of the treasury single account came into manifestation on the 11th of august which marks the beginning of MDAs’ release of revenues that was due to the Federal Government into a unified account which is maintained by the Central Bank of Nigeria (CBN). It was discovered that the payment of government revenue into multiple bank accounts which was operated by MDAs in commercial banks, as obtained under the old order, was now clearly against the Nigerian Constitution which, in Sections 80 and 162, directed that all federally-collected revenues should be paid into the Federation Account. It was a flagrant breach of the constitution that underscores the rot in the management of the country’s finances. It is heartening that this will now be history, going by the efforts of the new administration to implement the TSA policy that was reportedly first recommended by the Federal Government’s Economic Reform and Governance Programme in 2004, but dumped in 2005, following intense pressure from the banking industry. TSA also is part of the Public Financial Management reforms which falls under Pillar 3 of the National Strategy for Public Service Reforms towards Vision 20:2020. The public financial management reforms were designed to address impediments to effective and efficient cash management.

1.2 STATEMENT OF PROBLEM

The treasury single account have gone a long way in the reduction of fraudulent activities in Nigeria at the same time it has created worries and a lot of anxiety by its implementation some of this anxieties include the following:

Job losses

No more free money

Squeezing of the credit market

The level of liquidity of most commercial banks has been reduced drastically during the implementation; the bank asset was estimated to about N14 trillion with most of the government funds at the rate of 10 to 15 percent and a credit reserve of ratio of about 30 to 31 percent. Now if for instance the bank have about N9.6 trillion to lend; with the implementation of the TSA, the bank will pay in about N2 trillion into the treasury single account which will in turn reduce the total amount owned by the bank to about N7.6 trillion; this gap will cause liquidty crunch and difficulties. Secondly most money looters in the federal government will have no free money to loot.

1.3 AIM AND OBJECTIVES OF STUDY

The study aid at resolving the issue of fraud in most of the public sector of the Nigeria economy and to help the federal government of Nigeria in decision making, some of the objectives are as follows:

To examine the effect of treasury single account on the level of fraud in Nigeria

To examine the relationship between TSA and the public finance in Nigeria

To examine the effect of treasury single account on the level of job loss in Nigeria

To determine the effect TSA on credit market

1.4 RESEARCH QUESTION

To ascertain the above objectives the study came with the following research questions:

What is the effect of treasury single account on the level of fraud in Nigeria?

What is the relationship between TSA and the public finance in Nigeria?

What is the effect of treasury single account on the level of job loss in Nigeria?

What is the effect TSA on credit market?

1.5 RESEARCH HYPOTHESIS

Hypothesis 1

H0: There is no significant relationship between TSA and the level of fraud in Nigeria

H1: There is significant relationship between TSA and the level of fraud in Nigeria

Hypothesis 2

H0: TSA has no significant effect on credit market

H1: TSA has significant effect on credit market

1.6 SIGNIFICANCE OF STUDY

The study will be of immense benefit to the federal government of Nigeria, students, researchers and the central bank of Nigeria as it will discuss the effect of TSA on the level of fraud in Nigeria, the study will also discuss the effect of TSA on job loss in Nigeria; finally the study will discuss the effect of TSA on credit market.

1.7 SCOPE OF STUDY

The study will focus on the effect of treasury single account on the level of fraud in Nigeria; it will cover the credit market and its effect on job loss.

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: 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.

FRAUD: wrongful or criminal deception intended to result in financial or personal gain.

CREDIT MARKET: is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the secondary market.

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