EFFECT OF TREASURY SINGLE ACCOUNT ON LIQUIDITY OF QUOTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

The study presents empirical evidence on the effect of Treasury Single Account on liquidity in the Nigeria banking industry using annual financial report data for the period 2009-2019. In order to determine the relationship between Liquidity and TSA the study adopted the following proxy variables namely; Current ratios, Liquidity Coverage Ratio, Loan to deposit ratio. Previous works on this topic didn’t provide empirical evidence as to the relationship TSA has with liquidity of banks. The researcher used the ex-post facto research design. The target population comprised of the quoted commercial banks in Nigeria. The study made use of secondary data extracted from annual reports of studied banks. The research used a time series analysis to compare the pre and post TSA implementation effect. The data were analyzed using descriptive statistics and Paired Samples t test to compute data from line and bottom line items in financial statements. The analysis showed t value of -1.283 with significance of 0.269 which is more than 0.05; t value of -4.188 with significance of 0.014 which is less than 0.05 and t of -1.926 with significance of 0.126 which is more than 0.05 was gotten for current ratio, Liquidity coverage ratio and loan-deposit ratio. Contrary to most previous empirical works and past assertions, the implementation of Treasury single Account policy had no significant effect on current ratio, and loan-deposit ratio but there was a significant effect on borrowing culture. The study concludes that TSA has re-aligned the banks to diversify into other areas of investment and improve marketing for continuous survival and growth. The study recommends that DMBs should look inwards to face the core functions for which they were licensed for, and create formidable marketing plans to source for liquid assets and increase their investments; this would help maintain their liquidity