AN APPRAISAL OF THE EFFECT OF CASH ADMINISTRATION ON THE STATE PUBLIC SECTOR IN NIGERIA
ABSTRACT
The research work was to investigate the impact of cash management on the state public sector of Nigeria. The stated hypothesis is to determine the effect of money supply and fiscal deficit on the gross domestic product of Nigeria. On the literature review we were able to determine the advantages of cash management on the public sector of Nigeria. The method used for the purpose of analysis was the ordinary least square regression analysis.
From the analysis, we were able to find out that the value of that the value of the R2 is 0.781 which shows the explanatory variable was able to explain 78.1% of the dependent variable while the value of the adjusted R2 is 0.776 which also shows that the explanatory variable was able to explain 77.6% of the dependent variable.
From the table of ANOVA above we found out that the p-value is 0.008; which is less than
(0.05) level of significance so we concluded that there is a significant effect of money supply and fiscal deficit on the gross domestic product of Nigeria.
We found also that the value of d is 2.223 and we concluded that Since dU {1.654} < d*{2.239} < {4-dU}{2.346}, we accept the null hypothesis of autocorrelation.
We concluded that there is significant effect of money supply, fiscal deficit on the GDP.
INTRODUCTION
1.1 BACKGROUND TO STUDY
As many as 17 states in Nigeria were reported to have challenges in meeting cash payment obligations across the country, as at June 23, 2015 (City News 2015). The states owed their workers for different number of months, ranging from one month to seven months. Among these states, Osun State owed the highest number of months at eight months in total as at that date. The table below gives a breakdown of the states and their arrears as at the June 2015 date.
The is a table showing 17 states in Nigeria owing different arrears in cash obligations as at June 2015.
S/N
STATES
NUMBER OF MONTHS OWED
1
ABIA
3
2
AKWA IBOM
3
3
BAUCHI
2
4
BENUE
5
5
CROSS RIVER
4
6
EKITI
3
7
IMO
6
8
JIGAWA
1
9
KANO
3
10
KATSINA
2
11
KOGI
2
12
ONDO
1
13
OGUN
1
14
OSUN
8
15
OYO
4
16
PLATEAU
6
17
RIVERS
2
Source: City News, June 23, 2015.
The magnitude of states indebtedness was such that the Federal Government had to organize a bail out for all the states.
Using Osun State as a case study, this study seeks to examine the origin, causes, implications and solutions to this cash management crisis. It will examine the impact of cash management on public sector accounts, with particular focus on Osun State, Nigeria, as a representation of the overall public sector in Nigeria.
Public sector organisations must have a solid cash management system. Liquidity could mean cash or near cash assets. Cash management refers to a broad aspect of finance relating to the assortment, behaviour, and usage of cash. It involves assessing market liquidity, cash flow, and investments.
One of the functions of public sector cash management is to manage the cash balances of a public sector organisation in such a way as to maximize the availability of cash not invested in fixed assets or inventories and to do so in such a way as to avoid the risk of insolvency.
In some ways, managing cash flow is the most important job of public officers. If at any time a public sector organisation fails to pay an obligation when it is due because of the lack of cash, the organisation is insolvent. For instance, Osun State received bail out from the Federal Government. The key to successful cash management, therefore, lies in tabulating practical projections, monitoring collections and disbursements, establishing valuable billing and collection measures, and adhering to budgetary limitations. Kinnery (2012:808) indicated that cash flow was the receipt or disbursement of cash; when related to capital budgeting, cash flows arise from the purchase, operation, and disposition of a capital asset.
