Treasury Single Account policy: The pains and gains

The implementation of a Treasury Single Account (TSA) by the President Muhammadu Buhari-led All Progressives Congress’ administration, to block leakages and frustrate corruption in the system comes under scrutiny.

The announcement by President Muhammadu Buhari on Sunday, Au­gust 9, 2015, directing all ministries, departments and agencies (MDAs) of the Federal Government to close all their ac­counts domiciled in the money deposit banks and transfer their funds to a single federation ac­count, caught the banking sector hands down.

This directive, which govern­ment considered as part of meas­ures to ensure easy monitoring of revenue receipts, though sauce for the government, came at a time when the financial sector was grappling with some chal­lenges that have threatened to erode their bottom lines.
However, this is not a novel policy by the Buhari-led admin­istration as the Goodluck Jona­than-led administration, earli­er in January 2015, issued same directive to banks, giving them February 28, 2015 as the dead­line. But the directive was large­ly ignored by some banks until a fresh order came from the pre­sent administration.
The idea of TSA was moot­ed by the Central Bank of Nige­ria at the 235th Monetary Poli­cy Committee (MPC) meeting in November 2013.
Treasury Single Account has become a useful model many governments, all over the world, use to establish centralised con­trol over its revenue through ef­fective cash management. It enhances accountability and en­ables government to know how much is accruing to it on a dai­ly basis. In the case of Nigeria, it is expected that the implementa­tion of the TSA will help tame the tide of corruption.
Expectedly, as soon as Buha­ri gave the directive, MDAs com­plied even before the August 11, 2015 deadline given to them by the government.
The introduction of the TSA policy by the Federal Govern­ment apparently has a lot of far-reaching implications for the Nigerian public. The Federal Government, over the years, has lost a lot of revenues which ordi­narily should have been used ef­fectively to execute most of its de­velopmental projects.
Worried by this development and the need to ensure transpar­ency, accountability as well as block financial leakages, it how­ever, embraced the TSA policy.
TSA is a public accounting system under which all govern­ment revenues, receipts, and in­come are collected and deposit­ed into a single account, usually managed by the country’s Cen­tral Bank and all payments done through this account as well.
The purpose is primarily to ensure accountability of gov­ernment revenues, enhance transparency and avoid misap­plication of public funds. The maintenance of TSA will help to ensure proper cash management by eliminating idle funds usual­ly left with different commercial banks and in a way, enhance rec­onciliation of collected revenue and payments.
The initiative also requires banks that collect revenues on behalf of the Federal Govern­ment’s MDAs, remit such col­lections to the TSA domiciled in the Central Bank of Nigeria (CBN). Of course, consequent­ly, banks’ collections on behalf of MDAS are automatically remit­ted to the said account. Though the policy started in 2012, its full implementation was effective September 15, 2015.

History of TSA in Nigeria
Judging by the provisions of the Financial Regulations (FR) and the 1999 Constitution of the Federal Republic of Nigeria, some ministries/extra-ministe­rial offices, agencies and other arms of government collect rev­enue such as Value Added Tax (VAT), Withholding Tax (WHT), fees, fines and interests and they are expected to remit same into the Consolidated Revenue Fund (CRF).
According to section 16 of the Finance (Control and Man­agement) Act, LFN, 1990 and the Financial Regulation No. 413 (i), all unexpended recurrent votes for a financial year shall lapse at the expiration of the year. Con­sequently, all unspent balanc­es in the recurrent expenditure cash books at the end of 2012 fi­nancial year must be paid back to the consolidated revenue fund account N0. 0020054141107 with CBN by issuing mandate in fa­vour of “Sub-Treasury of the Federation”, Federal Sub-Treas­ury, Ladoke Akintola Boulevard, Garki II, Abuja, latest by the close of work on the last Friday of eve­ry December. It should be not­ed that all MDAs, including uni­versities, polytechnics, federal medical centres, teaching hos­pitals, research institutes, River Basin Development Authorities and FPOs were ordered to adhere strictly to this law.
All accounting officers are re­quired to make a return of un­spent balances on the recurrent expenditure cash books, along with copies of treasury receipts, to reach the office of the Ac­countant-General of the Federa­tion latest by close of business on Monday, December 31, 2012. It is obligatory to comply with this regulation in order to avoid im­position of stiff penalties against defaulters.
The irony, however, is that some parastatals did not remit their operating surpluses into the CRF as provided by the FRA 2007 (S. 22 and 23) while most MDAs engaged in acts that result in loss of government revenue.

How President Buhari enforced the policy
President Buhari had prom­ised state governors at the in­augural meeting of the Nation­al Economic Council (NEC) in June 2015, that all revenues pre­scribed for lodgement into the federation account would be treated as such under his watch and that he would ensure strict compliance with all relevant laws on accounting, allocation and disbursement.
Since then, the Presidency has worked with relevant agen­cies of the Federal Government to evolve this policy directive.
This directive applies to ful­ly funded organs of government like the MDAs and Foreign Mis­sions, as well as the partially funded ones, like teaching hos­pitals, medical centres, federal tertiary institutions, etc.
Agencies like the Central Bank of Nigeria, Securities and Exchange Commission, Cor­porate Affairs Commission, Nigeria Ports Authority, Nige­ria Communications Commis­sion, Federal Airports Authority of Nigeria, Nigeria Civil Avia­tion Authority, Nigerian Mari­time Administration and Safety Agency, Nigeria Deposit Insur­ance Corporation, Nigeria Ship­pers Council, Nigeria National Petroleum Corporation, Feder­al Inland Revenue Service, Ni­geria Customs Service, Mining, Minerals and Sustainable Devel­opment, Department of Petrole­um Resources are also affected.
For any agency that is ful­ly or partially self-funding, sub-accounts linked to the TSA are to be maintained at the CBN and the accounting system will be configured to allow them ac­cess to funds based on their ap­proved budgetary provisions.

CBN’s view on TSA
The Central Bank of Nigeria (CBN), had in November 2013 called for an urgent implemen­tation of the Treasury Single Ac­count (TSA) in order to proper­ly manage the country’s revenue.
The CBN stated this in a communiqué at the end of its 235th Monetary Policy Com­mittee (MPC) meeting where it noted that “a TSA is an essential tool for consolidating and man­aging governments’ cash re­sources. In countries with frag­mented government banking arrangement, the establishment of a TSA receives priority in the public financial management re­form agenda.”
The CBN lamented that the “erosion of the fiscal buffers through the depletion of the Ex­cess Crude Account (ECA) has further exposed the economy to vulnerabilities while the fall in oil revenues has left capital inflows as the only source of external re­serves accretion.”
It also expressed concern that the Federal Government’s debt had also risen astronomically along with its deposits at the de-posit money banks. This, it said, showed the Federal Government as a net creditor to the system.
“This underscores the urgent need for the immediate imple-mentation of the Treasury Single Account. The continued delay in returning government accounts to the Central Bank is adding to the huge cost of government debt due to poor cash flow man-age­ment,” the MPC added.

Stakeholder’s reactions
But stakeholders in the na­tion’s economy have expressed mixed reactions on the new pol­icy aimed at unifying payment methods of government’s min­istries and agencies.
Some said it takes a corrupt-free government to do this be­cause former President Jona­than’s administration whose hands, allegedly, were marred with corruption, lacked the gumption to implement it, be­cause that would have exposed so many hidden things.
But a Deputy Director in the Nigeria Deposit Insurance Cor­poration (NDIC), Mr. Ekechi, disagreed, saying that the last ad­ministration was at the point of developing the initiative before it exited. So, it was not the creation of the new administration.
“As we speak now, the meth­odology is not clear. The process is not released for it. Government is a continuum. What we are ex­periencing is a continuation of the policy initiative of the gov­ernment,” he said.
An economist and market analyst, Mr. Johnson Ugwoke, however, sharply disagreed with him, saying that the reason MDAs ignored President Jona­than’s order on TSA was because he was bent on being re-elected and so implementing it would jeopardise the business interest of his sponsors and so affect his presidential ambition negatively.
The Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said the new policy is a major step forward to reduce the preponderance of revenue leak­ages perpetrated by the minis­tries and agencies in the country.
According to him, the unified Treasury Single Account (TSA) would also increase the revenue inflow into the purse of the Fed­eral Government as well as place it in better stead to adequately meet its financial obligations to the citizens of the country.
Yusuf, who commended the incumbent government for mus­tering the will-power to imple­ment the policy said, its adoption is an indication that business is no longer usual for corrupt offi­cials who dupe and short-change government due to the old order.
He said the policy would be challenged by bureaucratic bot­tlenecks which would stifle the operations of some of the agen­cies. He urged the Federal Gov­ernment to find a lasting solution to the bottlenecks so that the ob­jectives of the policy will affect overall benefits to Nigerians.
Chief Executive Officer, CEO, of Economic Associates, Dr. Ayo Teriba, said the new pol­icy is a right step in the right di­rection, stressing that it is now necessary for government to de­termine what comes to its coffers at every given time.
He decried the situation in the past where agencies of the government abused the privilege.
He said: “We had agencies which handled capital projects and there were abuses. It is go­ing to be beneficial to the country when all revenues accruable to the government come to one ac­count and let us know how much money comes in. With this pol­icy, all agencies will go through appropriation process without exception.”
He expressed the optimism that the TSA system would dis­courage bureaucracy and delay in access to funds, and implored Ni­gerians to sacrifice so as to allow the new policy entrench the req­uisite transparency in the system.
He said it’s not true that the new policy would affect banks adversely, adding that money deposit banks would still be rel­evant in the emerging scenario.
He added: “I do not believe this will affect banks negatively. I pre-sume, much of the funds will still remain with the banks but will be monitored central­ly and if the treasury decides to place funds with the banks, it will be centrally coordinated. Banks should not panic about this. It does not mean all Federal Gov­ernment money will go to the CBN. Banks will still subscribe to government’s treasury bills.”
The Managing Director, Head-Africa Macro and Glob­al Research, Standard Chartered Bank, Razia Khan, commend­ed the new policy saying that it would ensure more transparen­cy in government finances as well as reduce the overall amount that government needs to borrow.
She advised the CBN to mon­itor the level of compliance of the new policy before it succumbs to the temptation of relaxing its hold on cash reserve ratio (CRR).
She said: “For monetary poli­cy, it raises some interesting ques-tions. Does the harmonised CRR need to be as high as it is, if many more public sector liabilities are removed from the banking sys­tem? The CBN will likely need to monitor compliance with the di­rective, before any changes could be made, easing the pressures on banking sector liquidity.”
The Head of Strategy, BGL Plc, Mr. Olufemi Ademola, main­tained that the TSA will boost the anti-corruption crusade of the new government as well as con­solidate all the accounts of the Federal Government, prevent leakages and help in shoring up the revenue of government.
He said the new policy would actually inculcate a sound bank­ing culture in most Nigerian banks.
His words: “with the imple­mentation of the TSA, banks will need to conduct proper fi­nancial intermediation and find innovative ways to improve li­quidity and returns. It would be tough at the initial stage but with time, they will adjust, easing the pressures on banking sector li­quidity.”
The new TSA has come to stay as part of innovation to pro­mote and entrench transparency in government’s revenue remit­tance in line with Buhari’s stance to free the country of corruption and graft.
It is hoped that the challenges that may beset the new policy is holistically tackled to allow Nige­rians enjoy the dividends of fiscal discipline and financial account­ability by the new government.
There are fears that the new policy may bring the nation’s banking sector to its knees due to the lump sum of money that would be withdrawn from their banks as well as inability to mobi­lise enough deposits to keep their operations afloat under the new regime.
A banker in one of the old generation banks in the country, Ademola Balogun, said the new system is a serious challenge for the banking sector and may cause some banks to consider downsiz­ing their workforce in order to cope with the development.
The AUTHORITY on Satur­day investigations revealed that already, there has been a gale of sack in some banks, especially majority of those banks where public funds are being ware­housed.
Some of the banks, it was learnt, could no longer afford to keep their staff, as ministries and agencies of government have commenced withdrawal of their deposits in commercial banks, in compliance with the Federal Government’s directive.
A highly placed source who is a top management staff in one of the first generation banks confid­ed in The AUTHORITY on Sat­urday that his bank had sacked over 1,000 of its staff members, nationwide, adding that the mostly affected in the downsiz­ing exercise are desk officers.
The source said, this devel­opment was due, in part, to clo­sure of government accounts with commercial banks, express­ing concerns that the TSA poli­cy, although designed to ensure accountability and transparen­cy, may equally ground a lot of commercial banks.
The source added: “As I speak with you now, about 1,000 of our staffers are already on their way out, because we can no longer ac­commodate them, but what we have done is to lay off more of the desk officers.”
Justifying the retrenchment of the desk officers, the source said: “If you lay off those who go out to look for deposits, you will worsen the situation. So, we have to look at the survival of the banks first. The consequence of allowing desk officers to stay and sacking those who bring depos¬its will be higher, so we took the safer: the option of let­ting desk officers go.
“The truth of the matter is that some of these deposits, es­pecially fixed deposits, help the banks a lot. Now, there is a di­rective that government funds be withdrawn. On the one hand, it will ensure accountability, but on the other hand, the banks will also have to reduce their staff strength or be ready to re­capitalise.”
Another source told The AUTHORITY on Saturday that about 2,500 members of staff of a new generation bank were also laid off for the same reasons, add­ing that most of them were those on temporary appointments.
He said: “The problem is that, if you lay off permanent staff at once, you also have to pay them all their entitlements, otherwise they will take you to court. Yes, majority of the people we truly do not need are unfor­tunately the permanent staff, but because of the confusion and lit­igation that will follow, we decid­ed to relieve those with tempo­rary appointments. It is a painful decision, but we have to do it in order to save the banks.”
Meanwhile, with the com­mencement of this policy, over N3 trillion is said to have ac­crued to the coffers of govern­ment, a development which is said would not have happened if the old system was in place. But be that as it may, the TSA has also hindered the execution of development programmes by donor agencies, which had their funds trapped in the government coffers.