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Treasury single Account and financial performance in Money deposit banks in Nigeria


Concerns over Deposit Money Banks’ (DMBs’) performance under the Treasury Single Account policy are growing. The performance of Nigerian DMBs, as well as their liquidity and capacity to generate risk assets, were investigated in this study using a sample of five financial institutions (Zenith Bank, First Bank, Guaranty Trust Bank, Access Bank, and United Bank for Africa), which are the top five banks in Nigeria based on The Banker Magazine’s 2017 ranking. Secondary and panel data from the DMBs’ financial statements for the years 2017 to 2023 were obtained using a historical research design. Ordinary Least Squares method of analysis was employed, through the use of Eviews® statistical software, to analyse the data collected and consequently verify the relationship between the variables. The results indicated that the Treasury Single Account has an insignificantly negative effect on the performance of Deposit Money Banks, and a significantly negative effect on their liquidity. However, there is a significantly positive relationship between the TSA and the DMBs‘ ability to create risk assets. It was recommended, on the basis of the findings, that DMBs should be proactive in providing innovative products and services, as a panacea for the negative effect brought about by the TSA on their performance. Central Bank of Nigeria should address liquidity problems faced by the DMBs and DMBs should have strong deposit mobilisation strategies which are especially targeted at institutional investors.


 Chapter one


Background of the study

The Treasury Single Account (TSA) is a financial policy introduced by the Nigerian government to consolidate all inflows from its agencies into a single account. The primary objective is to enhance transparency, improve government cash management, and minimize inefficiencies in public fund utilization.

The implementation of the TSA in Nigeria began in 2015, and it has since undergone various phases and adjustments to refine its effectiveness. The Central Bank of Nigeria (CBN) plays a crucial role in overseeing and facilitating the operations of the TSA. (CBN, 2016).

The implementation of the TSA has had significant implications for money deposit banks in Nigeria. By consolidating government funds into a single account, the government aims to reduce the reliance on multiple accounts spread across various banks. This consolidation can affect the liquidity levels of the banks, impacting their ability to use government funds for short-term investments. Jat (2016)

Money deposit banks, which traditionally relied on holding government funds to boost liquidity, now face challenges in managing their liquidity effectively. With the majority of government funds moved to the TSA, banks must explore alternative sources for liquidity. The TSA has also influenced the interest income and profitability of money deposit banks. Since government funds are no longer held in various accounts across banks, the interest income generated from such funds has decreased. This has prompted banks to seek alternative strategies to maintain profitability. (Onuba, 2017)

The move towards a single treasury account has encouraged banks to diversify their portfolios and seek opportunities in other sectors. This diversification is aimed at mitigating the risks associated with the concentration of government funds and enhancing overall financial performance. (Onuba, 2017)

The impact of the TSA on the financial performance of money deposit banks in Nigeria has been a subject of analysis and discussion. Several studies have explored how banks have adapted to the changes brought about by the TSA and how these adaptations have influenced their financial performance.

Money deposit banks have been prompted to diversify their sources of revenue by expanding into non-interest income streams such as fees and commissions, investment banking, and fintech collaborations. In response to the changes in liquidity management, banks have implemented efficiency measures to optimize their operations and maintain financial stability. Compliance with regulatory requirements associated with the TSA, such as the submission of accurate and timely reports, has become a critical factor in determining the financial performance of banks. (Agbo, Jugu, & Okwoli, 2016)

The adoption of technology has become crucial for money deposit banks to streamline their operations, enhance customer experience, and remain competitive in the evolving financial landscape.

The Treasury Single Account in Nigeria has undoubtedly reshaped the financial landscape, impacting money deposit banks in various ways. While challenges exist, banks have also adapted by exploring new avenues for revenue generation and implementing measures to enhance efficiency. Continuous monitoring and assessment are essential to understand the evolving dynamics and ensure the stability and resilience of the banking sector in the face of ongoing financial reforms.

Statement of the problem

The implementation of the Treasury Single Account (TSA) in Nigeria has been a significant financial policy aimed at consolidating government funds for improved transparency and accountability. However, this policy shift has raised several concerns regarding its impact on the financial performance of money deposit banks in the country.

The consolidation of government funds into the TSA has the potential to create liquidity challenges for money deposit banks. With a substantial portion of funds now held in the central account, banks may experience a reduction in available liquidity, affecting their ability to meet short-term obligations and maintain optimal cash reserves.

Government deposits traditionally represent a significant source of interest income for money deposit banks. The transition to the TSA may lead to a decline in interest income as these deposits are moved away from commercial banks. This raises concerns about the overall profitability of banks and their capacity to generate income from alternative sources.

The financial performance metrics of money deposit banks, including profitability and Return on Assets (ROA), are likely to be influenced by the changes brought about by the TSA. Understanding the extent of this impact is crucial for assessing the overall health and sustainability of the banking sector in Nigeria.

The sudden shift in the banking landscape due to the implementation of the TSA may pose challenges for money deposit banks in terms of adjusting their business models and strategies. Banks may need to explore new avenues for revenue generation and operational efficiency to mitigate the potential negative effects on their financial performance.

As government funds are centralized in the TSA, money deposit banks face the challenge of identifying and securing alternative sources of funding. The shift in government deposits prompts a reevaluation of funding strategies, and banks may need to diversify their portfolios to maintain financial stability.

The regulatory environment plays a crucial role in shaping the financial landscape. The impact of the TSA on money deposit banks may be influenced by regulatory measures and policies. Examining the regulatory framework and its implications is essential for understanding the broader context of the challenges faced by banks.

Objective of the study

The objectives of the study are;

  1. To establish the correlation between deposit money banks (DMBs) performance and public sector funds.
  2. To determine what effect, the TSA initiative has on the liquidity of DMBs.
  3. To discover the effect of the TSA policy on risk assets creation in the Nigerian banking industry.

Research Questions

The following research questions are formulated

  1. To what extent were DMBs dependent on deposited funds belonging to government ‘s MDAs for profit generation?
  2. How does the introduction of the TSA affect the liquidity of DMBs?
  3. What is the sort of relationship that exists between the TSA policy and risk assets creation in the Nigerian banking industry?

Research Hypotheses

The following are the hypotheses of this work:

Hypothesis I

H0: The TSA policy has no significant effect on the performance of DMBs.

Hypothesis II

H0: The TSA policy has no significant effect on the liquidity of DMBs.

Hypothesis III

H0: The TSA policy has no significant effect on risk assets creation in the Nigerian banking industry.


The significance of studying the impact of the Treasury Single Account (TSA) on the financial performance of money deposit banks in Nigeria lies in its potential to provide valuable insights and contribute to various stakeholders, including policymakers, regulators, financial institutions, and researchers. Here are some key aspects of the study’s significance:

Understanding how the implementation of the TSA affects the financial performance of money deposit banks enables policymakers to evaluate the effectiveness of the policy. This knowledge can inform potential adjustments to the policy framework, ensuring that it aligns with the broader goals of financial stability, transparency, and economic development.

The study helps identify and assess the risks associated with the TSA implementation for money deposit banks. This includes liquidity risk, interest rate risk, and potential impacts on profitability. Banks can use these insights to develop risk management strategies and adapt their operations accordingly.

Money deposit banks can leverage the study’s findings to adjust their operational strategies in response to the changes brought about by the TSA. This may involve diversifying revenue streams, optimizing cost structures, and exploring new avenues for sustainable growth in a shifting financial landscape.

Investors and stakeholders in the banking sector, including shareholders and depositors, benefit from a comprehensive understanding of how the TSA influences the financial health of money deposit banks. This knowledge contributes to increased transparency and helps build and maintain confidence in the stability of the banking sector.

The study contributes to the academic discourse on financial policies and their implications for banking institutions. It adds to the body of knowledge by providing empirical evidence on the impact of the TSA on the financial performance of money deposit banks, fostering a deeper understanding of financial dynamics in the Nigerian context.

Regulatory bodies can use the study’s insights to refine and adapt the regulatory framework governing the banking sector. This may involve introducing measures that mitigate potential negative impacts on financial performance and promote a more resilient and adaptive banking industry.

The study’s findings contribute to the broader goals of economic development and fiscal management by shedding light on how the TSA influences the flow of funds within the economy. Policymakers can use this information to fine-tune fiscal policies and promote financial stability in the country.

The study’s results can be utilized to develop targeted capacity-building programs and training for professionals within the banking sector. This helps banking institutions adapt to the changing financial landscape and equips personnel with the skills needed to navigate the challenges posed by the TSA.

Scope of the study

The scope of the study covers Treasury single Account and financial performance in Money deposit banks in Nigeria. The study will be limited to money deposit banks in Nigeria

Limitation of the study

Data Availability and Quality: The study’s reliability may be contingent on the availability and quality of data. Limited access to accurate and comprehensive financial data from money deposit banks could constrain the depth of the analysis and the robustness of the conclusions.

Time Constraints: The implementation of the TSA and its effects on financial performance may evolve over time. The study might be limited in capturing long-term trends and might not account for future developments or adjustments in government policies and banking practices.

External Economic Factors: The financial performance of money deposit banks is influenced by various external economic factors such as inflation rates, exchange rates, and overall economic conditions. The study may face limitations in isolating the specific impact of the TSA from broader economic trends.

Definition of terms

  1. Treasury Single Account (TSA): The Treasury Single Account is a financial policy that consolidates all government funds into a single account maintained by the central bank or a designated government financial institution. The aim is to streamline government cash management, improve transparency, and enhance accountability.
  2. Financial Performance: Financial performance refers to the effectiveness and efficiency with which a financial entity, such as money deposit banks, manages its resources to achieve its objectives. Key indicators of financial performance include profitability, liquidity, solvency, and efficiency.
  3. Money Deposit Banks: Money deposit banks, also known as commercial banks, are financial institutions that accept deposits from the public and provide various financial services, including loans, credit, and investment products.
  4. Liquidity: Liquidity refers to the ease with which assets can be converted into cash without significant loss of value. In the context of money deposit banks, liquidity is crucial for meeting short-term obligations and maintaining financial stability.


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