According to Oyedele (2015); Treasury Single Account its a unified structure of government bank accounts that gives a consolidated view of government cash resources. He said that it is based on the principle of unity of cash and the unity treasury, that a treasury single account is a bank account or a set of linked accounts through which the government transacts all its receipts and payments. He then said it is necessary to distinguish individual cash transactions for the control and for reporting purposes.
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Section 80 (1) 1999 Constitution of the Federal Republic of Nigeria (as amended) provides “all revenues or other moneys raised or received by the Federation (not being revenues or other moneys payable under this Constitution or any Act of the National Assembly into any other public fund of the Federation established for a specific purpose) shall be paid into and form one Consolidated Revenue Fund of the Federation.” However successive governments have operated numerous accounts used to collect and spend public funds in flagrant disregard to this provision of the constitution in the Nigerian law.
In 2012 the government ran a pilot scheme for Treasury Single Account using 217 Ministries, Departments and Agencies to test the scheme. Over N450 billion was saved by the scheme and the government was motivated to implement TSA. The Remita e-collection platform was developed for the implementation of the TSA scheme and banks were directed to integrate the software into their core banking systems and train their staff on how to use it. But like everything Nigerian, this was not the case.
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An excerpt from Communique No. 92 issued at the Monetary Policy Committee meeting held on the 18th and 19th of November 2013 reads; “The Federal Government debt has also risen phenomenally along with its deposits at the deposit money banks, showing the Government as a net creditor to the system. This underscores the urgent need for the immediate implementation of the Treasury Single Account. The continued delay in returning government accounts to the Central Bank is adding to the huge cost of government debt due to poor cash flow management.
To my own understanding, treasury single account can be seen as a public accounting system under which all government revenue or income is collected into one single account called the treasury account (Treasury Single Account).
Treasury Single Account can also be said to be an accounting system in which all government revenue (income) and payments (expenses) are done through a single account.
In this article, we will consider only three major factors of the treasury single account on the economy of Nigeria.
Effects of Treasury Single Account on the Economy of Nigeria
1. Allows complete and timely information on government cash resources: In countries with advanced payment and settlement systems and an Integrated Financial Management Information System (IFMIS) with adequate interfaces with the banking system, this information will be available in real time. As a minimum, complete updated balances should be available daily.
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2. Improves appropriation control: The TSA ensures that the full control over budget allocations, and strengthens the authority of the budget appropriation. When separate bank accounts are maintained, the result is often a fragmented system, where funds provided for budgetary appropriations are augmented by additional cash resources that become available through various creative, often extra-budgetary, measures.
3. Improves operational control during budget execution: When the treasury has full information about cash resources, it can plan and implement budget execution in an efficient, transparent, and reliable manner. The existence of uncertainty regarding whether the treasury will have sufficient funds to finance programmed expenditures may lead to sub-optimal behavior by budget entities, such as exaggerating their estimates for cash needs or channeling expenditures through off-budget arrangements.
4. Enables efficient cash management: A TSA facilitates regular monitoring of government cash balances. It also enables higher quality cash out-turn analysis to be undertaken (e.g., identifying causal factors of variances and distinguishing causal factors from random variations in cash balances).
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5. Reduces bank fees and transaction costs: Reducing the number of bank accounts results in lower administrative cost for the government for maintaining these accounts, including the cost associated with bank reconciliation, and reduced banking fees.
6. Facilitates efficient payment mechanisms: A TSA ensures that there is no ambiguity regarding the volume or the location of the government funds, and makes it possible to monitor payment mechanisms precisely. It can result in substantially lower transaction costs because of economies of scale in processing payments. The establishment of a TSA is usually combined with elimination of the “float” in the banking and the payment systems, and the introduction of transparent fee and penalty structures for payment services. Many governments have achieved substantial reductions in their real cost of banking services by introducing a TSA.
7. Improves bank reconciliation and quality of fiscal data: A TSA allows for effective reconciliation between the government accounting systems and cash flow statements from the banking system. This reduces the risk of errors in reconciliation processes, and improves the timeliness and quality of the fiscal accounts.
8. Lowers liquidity reserve needs: A TSA reduces the volatility of cash flows through the treasury, thus allowing it to maintain a lower cash reserve/buffer to meet unexpected fiscal volatility.
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Other benefits include the blocking of leakages that have stunted the growth of the economy, ensuring of accountability of government receipts and expenditure, promotion of transparency, reduction of corruption and diversion of public funds, elimination of idle funds left in numerous accounts in commercial banks usually used to bear interest for corrupt entities and easier reconciliation of revenue collection and payments.
In summary, I think the implementation of this treasury single account system in Nigeria has a great positive effect on the economy of the country as public funds are better managed with alongside low liquidity of reserve funds.