Measuring the Impact of Treasury Single Account on the Failure of Financial Institutions

Kenneth Enoch Okpala, Oyinlola Akinyede, Temitope Mariam Worimegbe


Structured abstract

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.

Full Text:




Adebisi, J. F., & Okike, B. M. (2016). The adoption of the treasury single account (TSA) and its effect on revenue leakages of Nigerian states. American Research Journal of Business and Management, 2, 1-10

Adeolu, I. A. (2015). Understanding the treasury single account (TSA) system: Things you should know. Business, Economy & Market Development. Retrieved on January 19, 2017 from:

Afonso, G., Kovner, A., & Schoar, A. (2014). Trading partners in the interbank lending market. Federal Reserve Bank of New York Staff Reports No. 620. Available at

Bonner, C., & Eijffinger, S. (2010). The impact of the LCR on the interbank money market. Journal of Banking and Finance, 25, 1287 - 1317

Central Bank of Nigeria, (2015). Revised guidelines for compliance with treasury single account (TSA) by banks in Nigeria. Supervision Annual Report, 32-38.

Central Bank of Nigeria (2016, February 19). Guidelines for the operation of treasury single account (TSA) by state governments in Nigeria. Retrieved on June 12, 2017. From

Chukwu, I. (2015, August 16). Can treasury single account (TSA) work in Nigeria. Retrieved February 12, 2017, from Vanguard Editorial Newspaper.

Cimini, G. & Serri, M. (2016). Entangling credit and funding shocks in interbank markets. PLoS ONE, 11(8),

– 15.

Eastern Caribbean Central Bank (2011). ECCB Assumes Control of the ABI Bank, ECCB Press Release

Edem, D. B. (2017). Liquidity management and performance of deposit money banks in Nigeria, 1986-2011: An investigation. International Journal of Economics, Finance and Management Sciences, 5(3), 146 - 161

Ekubiat, J. U., & Ime, E. E. (2016). Adoption of treasury single account (TSA) by state governments of

Nigeria: Benefits, challenges and prospects. Journal of Finance and Accounting, 4(3), 126 -130.

Eme, O. I., & Chukwurah, D. C. (2015). An analysis of pros and cons of TSA Policy in Nigeria.

Arabian Journal of Business and Management Review (OMAN Chapter), 5(4), 20-40

Ernst-Ludwig, T. (2009). Discussion of interbank lending, credit-risk premia, and collateral. International Journal of Central Banking, (December, 2009), 45 – 50

Fatile, J. O., & Adejuwon, K. D. (2017). Implication of treasury single account on the cost of governance in Nigeria: Buhari civilian administration in perspectives. International Journal of Advanced Studies in Economics and Public Sector Management, 5(2), 13 - 29

Ghazouani, T. (2013). The capital structure through the trade-off theory: Evidence from Tunisian Firm. International Journal of Economics and Financial Issues, 3(3), 625-636

Gabbi, G, Iori G, Jafarey S, Porter J. (2015). Financial Regulations and Bank Credit to the Real Economy. Journal of Economic Dynamics & Control, 50, 117–143

Greenwood, R., Landier, A., & Thesmar, D. (2015). Vulnerable banks. Journal of Financial Economics,

(3), 471–485.

Heider, F., & Hoerova, M. (2009). Interbank lending, credit- risk premia, and collateral. International Journal of Central Banking, 5 (4), 5–43

Hongduo, C., Ying, L., Weilong, C., & Chen, J. (2017). Systemic risk in China’s interbank lending market. Journal of Mathematical Finance, 7, 188-198. DOI: 10.4236/jmf.2017.71010

Igbekoyi, O. E., & Agbaje, W. H. (2017). An assessment of the implication of treasury single account adoption on public sector accountability and transparency. European Journal of Accounting Auditing and Finance Research, 5(8), 33 - 49

Isa, A. A. (2016). The treasury single account (TSA) as an instrument of financial prudence and management: prospects and problems. Journal of finance and accounting, 7(4), 66 - 71

Iyer, R. J., Peydro, L., da-Rocha-Lopes, S., & Schoar, A. (2014). Interbank liquidity crunch and the firm credit crunch: Evidence from the 2007-2009 crisis. Review of Financial Studies, 27(1), 347-372.

Iyerl. R., & Manju, P. (2012). Understanding bank runs: the importance of depositor-bank relationships and networks. American Economic Review, 102(4), 1414–1445. http://dx.doi=10.1257/aer.102.4.1414

Kanu, C. (2016). Impact of treasury single account on the liquidity. Journal of Advanced Research,

(1), 43-53.

Layne, W. (2010). Recent financial failures in the Caribbean: What were the causes and what lessons can be learnt. Online-Bajan Word Press. Retrieved on 23 October 2017, from:

Odewole, P.O. (2016). Treasury single account: A tool for effective cash management in Nigeria. Journal of Finance and Accounting, 4(6), 328 – 335

Oguntodu, J. A., Alalade, Y. S. A, Adekunle, Y. A. & Adegie, F. F. (2016) Treasury single account and Nigeria economy between 1999 - 2015: An assessment. Journal of Accounting and Financial Management,

(6), 61-75.

Okechukwu, O., & Chukwurah, D. (2015). An analysis of pros and cons TSA policy in Nigeria.

Arbian Journal of Business and Management Review (OMAN Chapter),5 (1), 21-39.

Okey, O. O., & Eduno, E. B. (2014). Corruption, governance and public spending in Nigeria: Implications for economic growth. British Journal of Economics, Management & Trade. 4(11), 1679-1699

Okpala, K.E. (2012). Strategic budget system and management of public resources: A Nigeria review. European Journal of Business and Management, 4(21), 71-82.

Okpala, K.E. (2013). Bank recapitalization and lending behaviour: A pragmatic evident from Nigeria banking sector. Journal of Finance and Investment Analysis, 2(4), 01 – 09.

Okpala, K.E. (2014). Consolidation and business valuation of Nigeria banks: What consequence on liquidity level? International Journal of Business and Social Sciences, 2(10), 759 - 767

Okpala, K. E., Olabisi, J., & Adebayo, O. (2017). Implementing treasury single account among federal governments’ ministries, departments and agencies in Nigeria. Nigerian Journal of Management Sciences, Benue State University, 5(2), 9-20

Olagunju, A., Adeyanju, O. D., & Olabode, O. S. (2011). Liquidity management and commercial banks profitability in Nigeria. Research Journal of Finance and Accounting, 2(7/8), 24-38.

Oloba, O. M., Orenuga, O.O. & Nkuma, C. A. (2017). Treasury single account (TSA) system, financial system and economic growth in Nigeria. Journal of Economics and Sustainable Development,

(15), 61 - 84.

Onuorah, A. C. (2016). Federal government treasury single account (TSA) deposits and commercial banks performance. Journal of Social and Management Sciences, 11(3), 01-13

Oti, P., Igbeng, E., & Obim, E. N. (2016). Appraisal of policy impact of treasury single account in Nigeria. Research Journal of Finance and Accounting, 7(20), 45 - 52.

Rochet, J. C., & Xavier, V. (2004). Coordination failures and the lender of last resort: Was Bagehot right after all? Journal of the European Economic Association 2 (6): 1116–47.

Sailendra, P., & Israel, F. (2010). Treasury Single Account: Concept, Design and Implementation Issues. International Monetary Fund Fiscal Affairs Department. IMF Working Paper, WP/10/143

Soverall, W. (2012). CLICO’s Corporate Collapse: Poor corporate governance, American International Journal of Contemporary Research, 2(2), 1 – 13

The Senate Report (February, 2016). The abuse and mismanagement of treasury single account regime. Report of Joint Committee on Finance, Banking, Insurance and Other Financial Institution and Public Account. Retrieved on 23rd June, 2017 from: HYPERLINK.

Taiwo, O. (2015, October 10th). Treasury single account implications. Retrieved February 2017, from


Udoma, U. U. (2015). Implementation of TSA and Nigeria economy. Retrieved on October 12, 2017: From

Udo, E. J. & Esara , I. E. (2016). Adoption of Treasury Single Account (TSA) by State Governments of Nigeria: Benefits, Challenges and Prospects. Journal of Finance and Accounting, 4(3): 126-130

Utsu, E. A. Muhammed, M. B. & Obukeni, C.O. (2016). An assessment of the treasury single account policy on Nigerian economy. Social Sciences Journal of Policy Review and Development Strategies.


Vahyala, A. T., Pwafeyeno, M., & Minnessi, G. K. (2016). Treasury Single Account (TSA) policy in Nigeria: Reviving Jonathan’s ‘dead’ policy directives. 5, 6-12. Online Journal of Social Sciences Research, Issn 2277- 0844. Retrieved on 25th July, 2017. From:

Yusuf, M. B. (2016). Effects of treasury single account on public finance management in Nigeria. Research Journal of Finance and Accounting, 7(6), 164 – 170

ISSN 2183-5594