Measuring the Impact of Treasury Single Account on the Failure of Financial Institutions
Purpose: This paper evaluated the impact treasury single accounts on the failure of financial institutions in Nigeria. The objective was to determine the influence of the huge cash extraction from Deposit Money Banks which reduced the amount of cash in circulation. The exercise threw most of the commercial banks and the associated institutions financially off balance which negatively affected banks liquidity level and its ability to create credits. The issue also increased bank lending rate, triggered off staffs downsizes which worsen the unemployment situation in the first quarter of 2017 and was perceived to affect the real sector at the long run.
Design/Methodology/approach: A survey research design approach was adopted and 450 participants were used as the study population. Primary data were collected through copies of questionnaire administered and 325 valid responses were returned and analyzed. The response rate of 72% achieved was considered good enough for the analysis. Regression analysis technique with the aid of E-view (Version 9.5) was employed to measure the strength of the relationship between the variables.
Findings: Evidence obtained from the analysis results confirmed that deposit money bank liquidity crisis has significant effect on other financial institution liquidity crunch (R = .868 R2 = 854; P < .05) and Treasury single account (TSA) has significant impact on the failure of financial institutions (R = 0.878; R2 = 872; P < .05). Therefore all null hypotheses were rejected and the alternates not rejected.
Research limitations: This study has two known limitations. The first is the size of the population (30 top financial institutions (distributed among deposit money banks, insurance and investment companies). This is regarded as small compare to the total population. Second, the study concentrated on a sub-sector of Nigeria economy. Result may vary if other sectors affected by the treasury single accounts exercise are included in the study.
Practical implications: The two hypotheses developed and tested indicated that the sub variables of the independent have significant impacts on the dependent variable. The study concluded that Treasury single account (TSA) has significant influence on the failure of financial institutions in Nigeria. This is because deposit money bank liquidity crisis would negatively propel all financial institutions liquidity crunch through multiplier effect. Therefore the study concluded that Treasury single account had reliably predicted the failure of financial institutions in Nigeria.
Originality/ Value: To the best this researcher’s knowledge, no study was conducted to examine the relationship between treasury single accounts and failure of financial institutions. This has prevented conclusion in this direction. In order to address the identified gaps in the literature created by the omission, this study developed two hypotheses to enable the researcher explore the influence of TSA on the failure of financial institutions in Nigeria. The study first examined the linkage between liquidity problem of DMBs and that of other financial institutions and then the impact of TSA on the failure of financial institutions.
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