TSA’s gains and looming failure, one year after
By September 15, the implementation of the Treasury Single Account (TSA) in Nigeria will be one year. CHIJIOKE NELSON writes on the gains of the unique innovation so far and impending losses from threats of failure.
The kick off of the Treasury Single Account (TSA) operations in the country was one that generated reactions, with two distinct groups emerging. On the one hand, is the group that advanced fiscal discipline and accountability in public finance management, and on the other hand, those that raised the alarm over the consequences of such policy like job loses in banks, bottlenecks in governance, and a host of others.
TSA is a consolidation of the Federal Government’s revenue into a singular account domiciled with the Central Bank of Nigeria (CBN), for enhanced fiscal transparency and monitoring of government’s financial transactions.
Granted, both sides of the divide now have proof of their arguments earlier, but while no policy has been without side effects, it is only justified by the greater benefits. Rhetorically, is it normal to keep your money with someone and borrow the same money with interest rate to the keeper? Or can you give your money to someone who makes wealth out of it, but without anything for you in return? The answers to these were part of the reasons for the emergence of TSA.
TSA came as a foil to assess mismanagement of public finance between public officials and their collaborators in the private sector- the financial institutions. Within these 12 months, a mix of knocks and kudos have come the way of the policy and the promoters. But just few days ago, nine banks were banned from the interbank foreign exchange market, before one was cleared, over non-remittance of government’s $2.3 billion to TSA.
Last weekend, the nation’s number two public servant, Prof. Yemi Osinbajo, admitted that TSA has helped the country in this era of economic challenges, by plugging leakages. Specifically, the Vice President said that 40,000 ghost workers have been eliminated from the Ministries, Department and Agencies (MDAs).
Osinbajo in effect, was saying that the economy gained from the operations of TSA to the tune of the Minimum Wage at N18,500, multiplied by 40,000 ghost workers, which amount to N740 million per month. That is, for a period of 12 months, Nigeria has clawed back about N8.88 billion from that area. This is substantial, especially now that the country is in dire need of anything called money.
Earlier in the year, the Minister of Finance, Kemi Adeosun, said that TSA had saved the economy a whooping N3 trillion. This amount is half of the 2016 fiscal plan and would have been frittered away by fictitious claims, while some being stashed in unknown accounts.
Section 80 (1) of the 1999 Constitution stipulates that all revenues raised or received by the Federation…shall be paid into and form one Consolidated Revenue Fund (CRF) of the Federation.
The Minister of Information and Culture, Lai Mohammed, at the All Nigerian Editors Conference (ANEC) 2016, in Port Harcourt, claimed that this administration had managed scarce resources prudently, promoted the administration’s fight against corruption and saved Nigeria from imminent collapse, courtesy of TSA.
Before the implementation of the TSA, government agencies reportedly operated about 17,000 accounts and poorly monitored within the banking industry. The development, which gave rise to corruption, manifesting in fragmented bank accounts, also compromised revenue remittances and deposit dormancy.
Government could not ascertain its financial status and the heads of government agencies were not willing to disclose all, because the system was more like a “meal ticket”. Otherwise, how would the same government borrow from the bank what it already had in the bank?
“This is a national problem that perplexed everybody and when it is solved, somebody said it is expensive. At a point, nobody in the country could imagine the number of bank accounts operated by MDAs; nobody knew how much government was collecting daily; and the cost of collections for government was negotiated differently by respective MDAs, some as much as 10 per cent. Remittances were done at the discretion of MDAs because the money is kept somewhere.
“Before TSA, one could not say what account any payment is going to in behalf of government. Before TSA, government business is strictly done on working hours. But now, it has a single view of its financial position.
“Some people were benefiting, instead of the government. These monies were scattered in accounts such government does not know what it has, still without interest. When it needs money, it will now go to commercial to borrow through Treasury Bill at over 10 per cent. So, it was actually borrowing its money,” the Executive Director, Strategy and Corporate Performance, SystemSpecs, Deremi Atanda, said.
The Minister of Finance, acknowledged that “the economic challenges affecting our nation demand optimum efficiency in the management of public funds. TSA at the federal level has allowed, for the first time, visibility of the total quantity of government funds at any point in time”.
Before now, banks were “living large”, declaring “fat” profits as they trade with free money that were not appropriately provisioned. Of course, with no interest expense, all that the huge amount, which was in excess of N1 trillion, could earn, was appropriated in its entirety by the banks. Again, they were was not disengaging workers, even when their oil and gas exposures were not performing.
Basically, banks were using the free fund to invest in government’s bond, which is 100 per cent risk free, as they were all redeemed with high interest rate when due. This was a case of using government money to do lending business to government. For the rest of the free funds, banks were using them to speculate in dollar transactions at the official foreign exchange market, starting from the Wholesale Dutch Auction System to the Retail Dutch Auction System.
An accountant with specialty in public sector, Prof. Stephen Ocheni of Kogi State University, attested to the fact that global economies, particularly the developing countries like Nigeria are facing one of the greatest challenges of efficient allocation of resources, as well as stabilisation of the business cycles.
The outcome, he said, is the basis for the current global revolution in government accounting, following which Nigeria towed the path of TSA, among other economic policies, in expectations of taming the tide of corruption.
“An important factor for efficient management and control of government’s cash resources is a unified structure of government banking. Such unified banking arrangements should be designed to minimize the cost of government borrowing and maximize the opportunity cost of cash resources,” he said.
While the initiative has gathered avalanche of commendations and practical solutions to leakages in the system, it is unfortunate that the scheme would soon face its own share of challenge. It may even pack-up.
There are indications that about 15 banks are now avoiding TSA transactions or at best, some are rendering skeletal services. And the owners of the software, Remita, which is driving the scheme- SystemSpecs, remains owed. Barely three months after the TSA implementation, a controversy arose over the contractual agreement for a one per cent service fee to be shared in an agreed formula with the CBN and Deposit Money Banks (DMB).
At one point, the company said it had to refund all that it has earned, as ordered by government and since then, it has been providing the service without pay. Of course, the implementation of the policy looks unsustainable now, especially with the seeming “graveyard” silence accorded the matter or the prolonged difficulty in reaching any truce.
A Lagos-based management consultant, Emmanuel Chiaka, said it is a natural course that the service will be unsustainable indefinitely, when the government withholds statutory remuneration for services duly rendered.
“If the owners of Remita are foreigners, would government have continued to delay the payments of the commission due them? Would government have kept mum over the issue and not try to resolve it, even if it means renegotiating terms?
“The way we treat our entrepreneurs in this country has much to say about the quest for growth of local content, as well as the way foreign investors rate the investment climate here. We must promote and reward indigenous entrepreneurs. This initiative is what developed countries would be celebrating and marketing to us.
“Except our nation begins to respect intellectual property rights and reward innovation, we may be unknowingly scaring intellectuals and core professionals from doing any business with government,” he said.
But a top banking source, who pleaded anonymity, told The Guardian last weekend that the case against SystemSpecs is that of “witch-hunt”, jealousy and ignorance.
“Those behind the imbroglio are only looking at the value of the one per cent commission, without considering the cost of the service, the number of service providers involved and the value of the 99 per cent collected for government.
“Banks are increasingly declining the TSA transactions because of non-payment of the commission. It is justified for them to pull out because all the banks are struggling for survival now. This is not a time to deploy scarce resources into a project that the controversy surrounding it is tending towards infinity. Besides, government has pulled out all its money in the banking system, so what would be their gain?” the source said.
But SystemSpecs said the contract caters for the multiplicity of stakeholders involved in associated logistics, including commercial banks, Office of the Accountant-General of the Federation and CBN.
It noted that the one per cent was to be shared by the parties involved in an arrangement of 50 per cent to SystemSpecs, 40 per cent to the deposit money banks and 10 per cent to the introducer, which in this case was the CBN. “However, SystemSpecs did not receive any upfront payment to design the software. Remita was birthed out of years of unpaid sweat.”