Treasury single account (TSA) and banks' lending rates in Nigeria. (22nd December 2021)

• Record Type: Journal Article
• Authors: Oloko, Tirimisiyu F.; Yusuf, Muhammed A.
• Is Part Of: International journal of monetary economics and finance. Volume 14:Number 6(2021)
• Page Start: 551
• Page End: 571
• Publication Date: 2021-12-22
• Subjects: TSA -- treasury single account -- government deposits -- crowding-out effect -- bank lending rate -- SVAR model -- Nigeria; Monetary policy -- Periodicals; Finance -- Periodicals; Economics -- Mathematical models -- Periodicals; 332.4
• Languages: English
• ISSNs: 1752-0479

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.