Title: Treasury single account (TSA) and banks' lending rates in Nigeria

Authors: Tirimisiyu F. Oloko; Muhammed A. Yusuf

Addresses: Centre for Econometric and Allied Research, Department of Economics, University of Ibadan, Ibadan, 200284, Nigeria ' Food & Nutrition Science Laboratory Unit, International Institute of Tropical Agriculture (IITA), PMB 5320, Oyo Road, Ibadan 200001, Oyo State, 200132, Nigeria

Abstract: This study employs structural vector autoregressive (SVAR) model to analyse the dynamic effect of treasury single account (TSA) policy on the lending rates of Nigerian banks. It also conducts a counterfactual analysis to predict the potential effect of implementation of TSA policy at state and local government levels on banks' lending rates in Nigeria. Our results validate the use of bank lending transmission channel and SVAR model for the analysis of the effect of TSA policy. Empirical results suggest that TSA policy has a negative temporary effect on banks' lending rates in Nigeria. The counterfactual analysis reveals that there is a delay of about 1-2 months for TSA implemented at the sub-national level to influence banks' lending rates. It is recommended that the monetary authority cushioned the effect of TSA policy on banks' lending rate in Nigeria by applying a counter-active measure such as reducing cash reserves ratio.

Keywords: TSA; treasury single account; government deposits; crowding-out effect; bank lending rate; SVAR model; Nigeria.

DOI: 10.1504/IJMEF.2021.120023

International Journal of Monetary Economics and Finance, 2021 Vol.14 No.6, pp.551 - 571

Received: 27 May 2020
Accepted: 26 Jul 2021
Published online: 04 Jan 2022 *

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