High expectation for TSA By Henry Boyo

Emefiele CBN Governor

“First of all, you have got liquidity surplus in the banking industry; … there is over N1.3tn or so sitting in banks and belonging to government agencies. Now basically, they (these funds) are at zero percent interest and the banks are lending about N2tn to the government and charging 13 to 14%!   Now, that is a very good business model, isn’t it?   (You) Give me your money for free and I lend it to you at 14%; so why would I go and lend to anyone?”

It is however surprising that inspite of the outstanding level of intellect in the CBN and the Monetary Policy Committee, this odious practice was sustained, with the attendant oppressive interest rates, which increasingly expanded government’s indebtedness for several decades;The above is an excerpt from comments from Lamido Sanusi, former Governor of Central Bank, after a Monetary Policy Committee(MPC) meeting in July, 2013, when he denounced the apparent folly of government’s financial strategy.

expectedly, the stupendous returns from this misadventure increased the profitability of banks even when they neglected the growth of the real sector of the economy.

Government revenue domiciled in commercial bank accounts also provided opportunity for, civil servants, to divert public funds into interest yielding dummy accounts and selfishly cream off the profit, notwithstanding, that such greed led to protracted delays in the payments of staff salaries and the settlement of contractors’ bills.

Similarly, banks’ appetite for government deposits became so keen, that “physically correct” young females were engaged and promptly deployed to target the deposits of high net worth civil servants and related government agencies; consequently, successful budget implementation was often sacrificed on the altar of greed. Incidentally, by June this year, MDAs operated about 10,000 bank accounts nationwide.

Indeed, the Federal Government’s Economic Reform and Governance Programme recognized the reckless tradition of placing public funds in commercial banks and therefore recommended the implementation of a Treasury Single Account (TSA) for the Federation as from 2004. The TSA is defined as “a centralized cash position of the Treasury, where the revenues of all MDAs are consolidated and all cash outflows (payments and transfers) are executed in a single account within the custody of the CBN”.

The initial attempt to commence implementation of the TSA, was set aside in deference to intense pressure from the banking community in 2005. However, the TSA project, apparently, commenced partially in 2012 after other false starts during the tenures of former Presidents   Yar Adua and Jonathan respectively.

However, in order to fast track comprehensive implementation, government established electronic platforms in 2014for the TSA, as well as, Government’s Integrated Financial Management Information System (GIFMIS), and the Integrated Payroll and Personal Information System (IPPIS).

According to the CBN, the “Integrated Systems would unify government’s banking arrangements, assist the federal government in the effective utilization of government funds for approved projects, promote transparency and accountability in government operations, and reduce the cost and amount of government borrowing by maximizing the use of available governmemt resources to deliver projects”.

Full implementation of the TSA for payments of salaries, taxes, suppliers, and the collection of independent government revenue did not commence in Feb 2015 as earlier scheduled by Jonathan’s administration, probably because of the ‘distraction’ of election campaign, but full implementation has accelerated since President Buhari’s latest directive in August 2015.

Under the TSA initiative, all government payments are routed from the Government Integrated Financial Management Information System (GIFMIS) to CBN’s Payments Gateway, to effect e-payments into the accounts of individuals or corporate beneficiaries in commercial banks, microfinance banks and primary mortgage institutions, while salaries are also electronically routed through an Integrated Payroll and Personal Information Systems platform to create a fully automated payment and collection process for the Federal Government.

There is palpable optimism that, with diligent implementation, the TSA will enhance transparency and accountability in the management of public funds; furthermore, the practice should expectedly capture additional revenue to effectively fund more capital projects that lift the social welfare of Nigerians.  Nonetheless, some critics have cautioned that the noble objectives of TSA may not be realized if the peculiarities of some MDAs are not recognized; for example, revenue generating agencies with multiple collection centres will encounter serious challenges if they cannot patronize commercial banks nearest to them where CBN outlets do not exist.

Furthermore, if a “one size fits” all principle is employed for disbursements from the TSA to MDAs for budget implementation, we may end up, for example, inadvertently releasing huge funds for road construction in the rainy season rather than the dry season when it becomes more suitable for such undertaking.

In other words, disbursements must be finely programmed to match the peculiar requirements of each MDA. Indeed, this may not be too difficult if each MDAs provides projected annual cash flow statements that are realistically in tune with their respective income and expenditure expectations.

There are indications that MDAs have undergone orientations exercises, to facilitate transition to TSA project since 2013,   nonetheless, it may still take a while longer, coupled with a strong political will for the programme to gain a firm foothold as best practice in the judicious management of public resources.

Similarly, the traditional lackadaisical consolidation process and extended delays associated with budget enactment may also negate the high expectations from the operation of the TSA.

Clearly, with the TSA, late passage of budgets will also delay disbursements and may strangulate operations of key revenue generating agencies, such as the NNPC, NPA etc, and ultimately, inadvertently, jeopardize revenue projections from such agencies. Consequently, some analysts have recommend the retention of a certain percentage of receipts to ensure the unhindered operations of these government cash cows.

Similarly, forex generating agencies like NNPC should also be allowed to retain a part of their receipts in dollars in order to facilitate the smooth running of their businesses wherever transactions are not denominated in Naira.

The Treasury Single Account is also speculated to restrain the scourge of excess liquidity that fuels inflation, high interest rates and a sliding Naira value, which inadvertently makes the removal of fuel subsidy an uphill task. A closer examination may not however, support such expectation; for example, the level of systemic surplus cash clearly diminished very minimally when CBN’s liquidity   mop-ups remained unrestrained after 75% of government deposits were sequestered from the cash reserve base of commercial banks;

clearly, if 100% of government deposits i.e. a relatively paltry 9.3% of all deposits (N13.5Tn) including states and local governments were sterilized, the impact on liquidity would not be much different, in this event, government’s debt consolidation may only be impacted marginally by the adoption of TSA.

VANGUARD

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