TREASURY SINGLE ACCOUNT: Giving Life To Jonathan’s ‘Dead’ Policy Directives
But now, public servants carry them out with determined gusto. Perhaps, it is all because of the change mantra by the President Buhari administration, which was ushered in on May 29.
Though, the government is yet to unveil its economic agenda, leading institutions are keying to the administration’s resolve to move the country forward. In fact, it was the Economic and Financial Crimes Commission (EFCC), which spearheaded the flurry of actions, then followed by Ministries, Departments and Agencies (MDAs), and now, the Treasury Single Account (TSA) policy compliance introduced last year to block revenue generation leakages by former President Goodluck Jonathan, which was not effected even after a deadline was set for MDAs for February this year.
Suddenly, these MDAs following President Buhari’s comment at a function on plans to block revenue leakages by revenue generating agencies on their own without another enabling government circular promptly complied and moved their several revenue accounts maintained in banks to the Central Bank of Nigeria (CBN), including offshore accounts maintained by them, which has boosted Nigeria’s foreign reserves.
The TSA policy directive is not the only Jonathan ‘s ‘dead’ policy that President Buhari has revived by not making any addition, change, circular or by rolling out enforcement, but just by mere pronouncement at a public function. Others include, the Integrated Personnel and Payroll Information System in the public (IPPIS), introduced to block ghost workers syndrome, but was resisted by some MDAs and the harmonisation of the country’s various data banks hosted by different government agencies such as, the CBN; National Population Commission, INEC, Customs, Immigration Service and others.
Reacting to the development, a development economist, Mr. Odilim Enwegbara, commended the efforts of Buhari.
According to Enweagbara, “with TSA leading to the closure of about 10,000 multiple bank accounts operated by MDAs in commercial banks, banks will have to wake up from their slumber. This is because the era when government’s money is either lent back to government or invested in forex speculations is over. It also means that no longer at Bankers’ Committee meetings should member banks demand that the CBN pursues their self-serving high interest rates to their benefits and those of heads of MDAs who placed public money in their high-interest-yielding fixed deposit accounts. With TSA, government can easily quarantine its revenues, with intended consequences including forcing interest rates to naturally nose-dive, since no serious business should be ready to borrow at such double digit rates when the economy is struggling at between 4 and 5 per cent.
“TSA is forcing banks to leave their comfort zone caused by dependence on government money to now become as creative and inventive as it is the case in modern economies around the world, which is to seek private deposits through investing in the real sector of the economy. In fact, with economic financialisation soon over, banks will discover that their survival is dependent on their embracement of fractional reserve banking, which is leaving a fraction of private depositors’ funds in reserve while using the main deposits to chase high profit-yielding investments.
“This means that the era of economic diversification through industrialisation will soon begin. What this also means is that at the next Bankers’ Committee meeting, banks will insist that the CBN revisits its current cash reserve ratio (CRR) on private deposits from 31 per cent to possibly 0 per cent so that they can begin to attract more private deposits,” he pointed out.
However, for TSA policy to be maximised, he stressed that Nigeria needs it to be accompanied with the Fiscal Sunshine Bill, which if enacted will open up the financial activities of government in a way that there will be no more hiding place for those who divert or loot government money. For instance, with Fiscal Sunshine Act in place, budgeting process and implementation, including contract awards, should be in the open for Nigerians to see both how revenues are generated and how public money is being spent by those in government, and why.
ONYEKPERE: TSA Will Prevent Leakages In Generation, Management Of Revenue
Mr. Eze Onyekpere is the Lead Director of Centre for Social Justice, a civil society group based in Abuja. In this interview with CHIJIOKE NELSON, he discusses the re-emergence of TSA in public resource management.
What is the Treasury Single Account (TSA) and how would you describe the initiative?
THE TSA is a process and tool for effective management of government’s finances, banking and cash position. In accordance with the name, it pools and unifies all government accounts through a single treasury account. The advantages and benefits of the TSA are legion. The consolidation into a TSA paves way for the timely capture and payment of all due revenues into government coffers without the intermediation of multiple banking arrangements. This prevents revenue leakages in terms of revenue loss and mismanagement by operators of all revenue-generating agencies.
With this comes better cash management practices since the Treasury can at all times have an overall view of government’s cash position, as against the fragmented positions of different Ministries, Department and Agencies (MDAs), which need to be laboriously pooled together to get the overall picture. This will reduce the cost of borrowing by government and its agencies, as the government will likely be in the surplus at most times of the year. Take the example of the practice before the TSA, MDA ‘A’, based on budgetary releases could have surplus cash (meaning cash that is not immediately required) in its bank accounts whilst, MDA ‘B’, which needs immediate cash for urgent transactions is cash starved and has little or nothing in its account. Although, MDA ‘B’ has approvals in the budget for transaction, it has no immediate cash. MDA ‘B’ is likely to borrow from a bank at an interest to carry out the urgent assignment, thereby incurring costs to Treasury, whilst treasury finances lie idle in MDA ‘A’. This would no longer happen.
Why did previous administrations ignore it?
The first issue to note is that this is not a new idea. For those of us working in fiscal governance, we know that this idea has been around since the days of the President Olusegun Obasanjo’s administration. The idea has been around with the Government Integrated Financial Management Information System (GIFMIS). Even, the last administration of President Goodluck Jonathan had ordered all accounts closed by the end of February 2015, but it appeared the distraction of the elections did not allow the administration to follow through to ensure that all MDAs complied with the order. The Jonathan administration had run the TSA at the pilot stage as it claimed to have saved some sums of money in the mid-term report of the Transformation Agenda. This fact is supported by the concluding observations of Nigerians 2013 and 2014 International Monetary Fund’s article IV Consultations, where the TSA was listed as part of the reforms the government has embarked upon.
What will it bring about with regards to the nation’s revenue drive, transparency and fight against corruption?
The TSA is bound to improve transparency and accountability in public finance management. First, it will remove that organisational/MDA secrecy around the management of public finances. The discretionary aspect of accounting officers and politicians collaborating to do all manner of business with government finances before executing projects thereby causing delays or negotiating interest rates with banks for private gains will be over. The second is that revenue generating agencies that have been depriving the Treasury of due revenue through a plethora of bank accounts under their purview and which is not known to the authorities will no longer be able to defraud the revenue since all funds will be swept into the TSA. Thus, beyond transparency and accountability, the TSA will introduce economy and efficiency into overall management of public finances and this will in the long run lead to effectiveness of government spending since it places government in a better position to realise overall policy goals.
What challenges might likely beset the implementation?
The first challenge will be the political will to push the reforms through the entire system. Once the political will is secured, the chances of successful implementation will be great. The second is that the enforcement of the TSA on the big cows of the Nigerian economy such the Nigerian National Petroleum Corporation (NNPC) may be difficult and problematic. The NNPC for instance, is a big corporation with big tickets and challenges and issues that need responses on a day-to-day basis. It may be imperative to work out special rules and conditions to guarantee that they comply with the TSA.
There is going to be a change in status quo with this initiative. Who do you think are likely victims?
There will be no victims if we properly define the concept of a victim. If a man was taking what did not belong to him in the first place, he was merely stealing by depriving the owners of their belongings with intent to deprive them of the proprietary rights. In essence, he was stealing and committing an offence under Nigerian law. Thus, to stop him from continued commission and compounding of multiple offences does not convert him to a victim. It only sets the process right and nips crime in the bud. Blocking a source of revenue leakage does not amount to victimising anyone. I see this as a win-win scenario for all men, women and institutions of good conscience.
With banks losing cheap funds to scheme, what is your prediction for banks’ liquidity and employment?
I do not see the full implementation of the TSA hurting banks, properly so-called. It will only hurt establishments that purport and pretend to be banks but have failed, refused and neglected to understand banking and do what bankers do elsewhere. It is an opportunity for banks to refocus on the original purposes for which they were set up – to collect depositors’ funds (not necessarily government funds), keep them safe; engage in intermediation to create wealth and jobs for the economy and in the process earn profit for themselves. Yes, the idea of sitting idly and expecting rents and unearned income should be gone and gone for good. Good and well-managed banks will have no problem with this measure.
CHUKWU: Government Will Have Proper Picture Of Daily Revenues
Mr. Johnson Chukwu is the managing director and chief executive officer of Cowry Asset Management Limited. In this interview with CHIJIOKE NELSON, he overviews the implementation of the TSA and the likely outcomes.
How would you describe the Treasury Single Account?
A TREASURY Single Account (TSA) is a network of subsidiary accounts all linked to a main account such that, transactions are effected in the subsidiary accounts but closing balances on these subsidiary accounts are transferred to the main account, at the end of each business day. With the implementation of the Treasury Single Account, Ministries, Agencies and Departments (MDAs) will maintain their individual accounts with the commercial banks, but daily funding of their disbursements are made from the central or main account, which is resident with the Central Bank, just as their closing balances at the end of day are transferred to the main account.
The TSA is principally a cash management tool for efficient management of the Government’s cash position. Prior to the implementation of the TSA, government was incurring finance cost on debit balances in some MDA’s accounts while it was earning close to nothing on the credit balances of other MDAs. With the TSA, the net balances on all the MDA accounts will now reside with the Central Bank; hence, the government will avoid incurring interest costs when it has positive net position.
Previous administrations seemed to have neglected any benefit associated with the initiative. Why?
The immediate past government of President Jonathan actually commenced the implementation of the TSA, but in phases, with about 42 MDAs in the first phase. I think that subsequently, additional MDAs joined the TSA before the expiration of that administration’s tenure. It is, therefore, not correct to say that the previous administrations ignored the TSA.
Do you see the scheme rubbing-off on the nation’s revenue drive, transparency and fight against corruption?
In terms of revenue drive, the TSA will allow the government to see at a glance the daily revenues being generated by the Revenue Generation Agencies as well as identify negative variances. It will also eliminate the possibilities of diversion of government revenue. In addition to the above, the TSA will reduce the opportunities for corruption in the management of government cash positions. Those instances where government officials intentionally leave credit balances in some accounts while they borrow with other accounts, so that they will enjoy pecuniary benefits, will now be eliminated.
What about likely challenges in the implementation stage?
I do not envisage any major challenge in the full implementation of the TSA, given that the test run has been on for more than two years and the IT platform on which it rides on has been tested and found to be robust. The challenge would have come from those who were benefiting from the previous suboptimal system, but with the new sheriff — President Muhammadu Buhari, on the saddle and his no nonsense approach to corruption, I cannot imagine any civil servant trying to sabotage the implementation of the TSA.
Who do you think are likely victims generally?
The main victims would be the banks whose cheap source of funding has been withdrawn. Others are the corrupt civil servants who have been feeding fat from brokerage commission they receive from placing public sector funds with the banks.
With banks losing cheap funds to scheme, what about employment?
The full implementation of the TSA will certainly reduce the banks’ net liquidity position and hence constrain their ability to create credits. This will invariably affect their profitability. I however, do not think that the impact would be so severe as to lead to job losses. This is in view of the fact that many banks had made provisions for the exit of public sector funds from their balance sheet at the time when the Monetary Policy Committee imposed a 75 per cent Cash Reserve Ratio on public sector funds. Consequently, I expect any bank that is efficiently managed to have made adequate provisions for the exit of public sector fund.
BALOGUN: Total Consolidation Of Government Account Not Feasible
Dele Balogun is a senior Lecturer in the Department of Economics, University of Lagos. In this interview with TEMILOLUWA ADEOYE, he said the new government directive on consolidated account is not feasible.
The Federal Government recently issued a directive ordering a unified account for all government agencies, what is the implication to the banking sector?
IT is literally impossible to operate a unified account. It is not that it is not visible, but the intention is for you to provide adequate financial instructions that would guide government revenue collectors to be transparent. Perhaps the major problem that has been therewith revenue collection is not whether you assemble it in a distributable pool account but the financial instruction governing revenue mobilization has a setback.
The instruction should stipulate that every mobilization unit be able to retain a proportion of the revenue mobilized for meeting running expenses. For instance, a situation where the revenue mobilisation unit mobilises all its revenue 100 percent and pay it into the revenue account, what happens? It therefore depends on the nature of the parastatal. If it is essentially a spending parastatal, it is very easy to domicile all their expenses and account with the Central Bank Of Nigeria (CBN). It is equally easy to domicile account for revenue mobilisation agencies such as the Nigeria Customs Service, (NCS), but the issue is, what percentage of the revenue mobilised can the agencies retain and what is the timeline between realization and transfer to the consolidated revenue account? These are the issues. It has always been the rule that all revenues must be surrendered to the treasury, there is nothing new in it but instead of giving a blanket order, what the reform should actually stress is the financial instruction regarding how you can spend from the central account.
If it must be that the revenue-generating unit must surrender all to the treasury, then wait for expenditure approvals before it can spend and then what is the leeway provided? Must they always wait? It is not a big deal; it is just for the Federal Government to specify between when you relies that revenue and when you submit it to the treasury and also to decide if you have the right to retain a proportion as working capital.
What recurrent or overhead expenses is supposed to do is that at the beginning of every year, ministry or parastatal is supposed to have a budget and that budget is supposed to be provisions made for over head cost apart from salary, while others are classified among capital budget. A government has the choice to also say that if this is the revenue capacity of this organisation, they should also look at running cost. For accountability, if all revenue must be paid into the consolidated account, let them be paid, but before the beginning of the next revenue month, it is expected that you should have given then their overhead cost in advance. If the reform is going to work along that line, not that when the month has ended, then people are still being owed two to three months and you don’t even know when the overhead expenses would be catered for, this is the real issue.
Is it better for departments and agencies to wait for yearly budget approval?
Government is supposed to be a continuity and if we are to learn from the advanced countries, in the United States, there was a year that they threatened to shut down government over spending limits. But the spending limit they were talking about is the ability of Federal Government to over draw their account, that is to borrow from financial the system. In the sense that they anticipate that budget approval is not going to come soon. Therefore, it is like a standing order given to some banks for agencies to overdraw their account or give dispensation to the president to approve spending limit, which means that you are borrowing. They will not wait for the revenue to be realized before appropriation. You borrow in advance, so the debate was spending; they wanted to cut down government deficit. They sent a bill to Congress; they refused to extend the spending limit, and said they want the real budget, which would not come until three months later. So, if we are to introduce that into our system, you don’t just say you have to surrender all revenue. It should also be a situation where you give them a leeway that yes, we know you generate certain amount of revenue but we know your running capital is this amount. So, it should not be a huge thing, it should be 20 percent at the most for organisations like NNPC and others that rely on petroleum profit tax, of course we would know from the very beginning how they will be able to cope with their running expense and their revenue comes in especially from exports. All these have to do with the banks. When exports came, all export proceeds were surrendered to CBN; they were not expected to run their own independent, to receive foreign exchange and then run another one for the distributable pool account. Moreover, it is a banking issue in the sense that it does not become an issue except petroleum profit tax has been realized and you now want to spend some of that on your reserve in Naira, it means that you would be asking the same central bank to monetize. The issue there is that this becomes difficult to manage because at the level of Internally Generated Revenue (IGR), revenue agencies cannot even keep their accounts with CBN, it has to be with the commercial bank. Then whether or bot they have the right to spend out of that revenue. Why all these issues are emerging is because some revenue-generating agency realises that once you issue treasury receipt, you don’t have any right over that money. You will wait till your allocation comes.
Do you think with this policy government can achieve transparency in the management of public funds?
It depends on the type of institutions we are talking about. Perhaps government is looking at those institutions that generate foreign exchange. You can achieve it for agencies that are involved with collecting taxes, import for international trade or excise and duties. You can actually domicile the accounts of such agencies with central bank. But even in banking practice today, CBN cannot be a primary receiver of such revenue. It has to be commercial banks and that would then specify in that context what proportion of this revenue that the commercial banks may have realized on behalf of these agencies that can remain in the commercial account. Because when it remains in that particular commercial bank account, we also need to decide those that would draw from that account. But we have gone past the error where CBN does retail banking to all agencies. We are now looking at the operational challenge of implementing these policies, which means the bank branches within areas of collection, will be used by agencies to collect revenue. When you collect the revenue, you must pay it into an account and the CBN is not everywhere. The issue still remains what proportion can such agencies retain in their commercial bank accounts, and at what point would they surrender every thing to the central bank, because the central bank is the government’s bank and also the banker’s bank. In fact, for internationally generated revenue, it is easy to domicile; we know the agencies, especially when it relates to petroleum, but when you look at other form of taxes and revenue, it is not easy to identify one collection centre for all of them especially if it is mobilized by branches of banks spread across the country. There may not be need to totally centralize those accounts. We need to draw specific spending instructions for each sector according to their needs. For example, a university should still be able to chalks, relative comfort for the classroom, even after surrendering into the unified account.
I am not saying specifically that they should be allowed to retain, the ideal situation is to estimate their revenue generating capacity, estimate their needs and make provision to met the expenses that arises thereof in advance of realisation of this revenue.
Agencies should be allowed to keep a certain percentage, don’t you think that would encourage corruption we are trying to stop?
One way to look at it is that you approve a budget; you will not wait for the revenue to be realized before you start implementing it. What that means is that they should give a matching fund to meet their operational expenses. The rule has always been that agencies cannot spend from the money they generate. The issue is if they generate this revenue and they keep it in commercial banks, can you say that commercial banks should no longer be agencies to collect money but the CBN? There is no running away from revenue generation, if commercial banks do that, and government is to provides money in advance for meeting running cost, then you put a limit as part of the financial instruction.
Do we foresee a situation when there will be traffic when it comes to transfer of money to and from the commercial banks and central bank.
Where we are mixing up things is that we had moved away from the situation when CBN renders retail-banking services to government agencies. That is why all the states and local councils, parastatals, moved their accounts from CBN to commercial banks. The essence of doing that is that when states and local governments had their accounts with CBN, they were also given CBN cheques, which means they had the ability to withdraw from their account. CBN had shed off that segment and that is why CBN is no longer crowded. If we are going to implement this same directive by returning CBN to retail banking, it may not necessarily improve accountability as far as I am concerned. And it could affect most of the E-payment services that we are advocating. What is visible is that although the CBN is not doing retail banking, it still does that for special agencies of the Federal Government, although they have their accounts in commercial banks.
What do you think would be the overall effect of this policy on deposit banks?
With this policy, the ability of banks to create money would be hampered or limited. When banks have excess of funds, ideally, they use it to trade. The moment you move the reserved deposit money from money deposit bank to central bank, you create sterilisation and the ability to create more money or credit is hampered, meaning that the cost of borrowing naturally shoots up. Banks would not only have liquidity problem, it would stifle growth because they would not be able to create credit. That means that depending on the severity, the economy may go into a new phase of recession. There are already job losses because most of the banking process has been reduced substantially.
MARITIME STAKEHOLDERS: Consolidated Account Will Check Impunity
STAKEHOLDERS in the nation’s maritime sector have thrown their weight behind the Federal Government initiative on single treasury account, for all agencies and departments at the Central Bank of Nigeria (CBN).
Contrary to fears that the initiative might disrupt operations of some of the maritime agencies, including the Nigerian Ports Authority (NPA), with huge daily operations, stakeholders said it would rather promote accountability and responsible operations.
The President, Ship Owners Association of Nigeria, Captain Niyi Labinjo said the directive for a single treasury account would make the maritime agencies to be more proactive and prudent because it would no longer be business as usual as their spending will now be backed by fiscal allocation.
“There is nothing wrong with what the government is trying to do. We have been running this country in a wrong way, because what we have been doing is not empirically based. Before now, these agencies like NPA, the Nigerian National Petroleum Corporation (NNPC), the Nigerian Maritime Administration and Safety Agency (NIMASA), all of them determine what they remit to the government from what they realised.
“They just give whatever they like. The government should know how much they are making, how much they are spending, and what they are spending on. The National Bureau of Statistics (NBS), the Central Bank of Nigeria (CBN), Federal Ministry of Finance, and other relevant government agencies do not know what these agencies are making before now, but now, all of them will have the statistics for coordination and national planning purposes.”
According to Labinjo, spending by any government department in civilized countries are guided by their budgets, which make them to plan ahead, because they know what goes in and out of the treasury yearly.
“But here the agencies spend their revenue the way they like, without question from any quarter, provided they give paltry sum to the Federal Government. Here, the agencies believe they are doing the government favour by giving a little fraction of their revenue, when it should be their statutory responsibility to the government to fund the government. So it is imperative for the government to know how much they are generating.”
He said all agencies, before now, demonstrated impunity in the way they spent public fund, because the country lacks institutions to check their excesses.
The master mariner said the management of the maritime agencies has nothing to fear, provided they become proactive and do the right thing at the right time.
According to him, the agencies would now learn how to prepare their budgets, capture their income and expenditure for the whole year and present it to the government, through the National Assembly, for approval to enable them withdraw from their revenue at the Central Bank.
“What government is telling them is that, before you spend money, first and foremost make the money for the government and later forward your requirements. Government consists of agencies and institutions. So at the end of the day, government will look at all the revenue and decide how to spend the money through allocation based on the needs of individual agencies and institutions. There are some institutions that are not generating revenue, yet critical to the existence of a nation. So the money will now be spread according to needs.”
Labinjo allayed fears that operations at some of the maritime agencies would be disrupted because of the likelihood of late approval of their budget under the new dispensation, saying, “ they don’t have to wait till September before they forward their budget estimates for approval. The National Assembly will also have to be awake to their responsibility by doing what is right at the right time. If all institutions can function properly, there will be no problem,” he said.
The former Director General, Nigerian Maritime Administration and Safety Agency, Ferdinand Agu said he is in support of the initiative, which he said is not new.
“It is a straight forward thing. All revenue must be in consolidated account with the CBN, and from there it will be disbursed. This is in line with Nigerian Constitution. So the maritime agencies should not have any problem with this directive. I don’t see why agencies in the maritime sector should keep money when they are not manufacturers. All they need now is for their operational costs to be captured in their yearly budgets. Before now, they were allowed to spend money on operations and remit the rest to the government, but it was abused. Their laws allowed them to keep revenue and transfer the rest. The real thing about our laws is that anything that comes must be shared. It does not allow for savings. So this law is not new, but it only reaffirms the existing law. If they insist on the implementation of the law, no money can be spent any longer, unless it is specified in the budget, the constitution is clear about that.”
The Chairman of Ports Consultative Forum, Otunba Kunle Folarin agreed with Agu, saying the single treasury account is a reaffirmation of the existing law. He said he is in support of the directive, which he believes would put an end to impunity, with which agencies are spending public funds.
“Actually, it is not a new thing. About 20 years ago, all government money was with the CBN. All agencies opened account with it. It is just a control measure. The control now is from the CBN, which is now like commercial banks. But the salient point now is that National Assembly must appropriate money and there must be strict adherence to the budget. The implication is that money not budgeted for cannot be disbursed or spent. That will stop impunity at agencies and departments because if you budget money for railway, it must be spent on railway, you cannot use the money for another purpose. That cannot happen again. There will be no diversion of money meant for one project to another as before now, but the only issue is delay between request and response by the CBN.
Delays are administrative issues, they all must now be proactive, plan ahead and make request for operational fund on time, because the CBN is now their banker and there must be correlation between budget, spending and items for spending.
The Former chairman of NIMASA, Alhaji Tijani Ramalan hailed the government for the present initiative, irrespective of any likely adverse effect, saying it will curb the impunity at the level of agencies.
For the maritime agencies that are operational in nature, he said government could take care of them through accelerated approval of their budget proposals.
“The Constitution of Nigeria is in support of what the government is trying to do because all revenue must go into government account at the CBN. The agencies are looting public fund because of the freedom given them in the past. So government wants to monitor how they are spending their money. Look at the way they are spending at NIMASA and the NPA. So the government is doing this in order to ensure checks and balances.
He described as “cock and bull story “ the impression that a single treasury account will affect operations of the maritime agencies.
“These are cock and bull stories. There are approval limits. If there is anything urgent in nature, there can be accelerated approval.
The agencies have experienced workers, who should be able to make projections that should be captured in their yearly budgets for accelerated approval. So there should be no fear because that is the right thing to do,” he said.
ALENOGHENA: TSA Would Boost Government Earnings, Strengthen Naira
Raymond Alenoghena is a doctorate degree candidate in the Department of Economics at the University of Lagos (UNILAG), Akoka and Managing Director (MD), Rainexpress Nigeria Ltd, a consultancy firm. In this interview with IKECHUKWU ONYEWUCHI, he argues that the Federal Government’s move to trap its earnings into the Single Treasury Account domiciled at the Central Bank of Nigeria (CBN) bodes well for transparency, accountability and would, in the long run, strengthen the Naira.
What do you make of the recent directive of the Federal Government to trap all its earnings into a Single Treasury Account?
THIS was done for transparency. Before, there was a talk of the NNPC not knowing the number of accounts it had. Now, all government organs that generate income are supposed to be accountable and know the sources of inflows into the different organisations. When it is difficult to establish these sources, there is room for people to tamper with funds. It is in the constitution that they are supposed to only open accounts to receive funds for the Federal Government, which is supposed to be domiciled in with the CBN. They had the authority under previous administrations to open accounts at will, provided the minister in charge of that ministry approves.
But that it is illegal. In line with the constitution, those accounts are supposed to be approved by the Federal Government. It is only when there is a contract or an assignment that a separate account can be opened in a commercial bank and money made available to run that project. It is not where they are supposed to receive funds. All revenue-generating organs are supposed to have accounts with CBN and all revenue is supposed to go there. If they take the directive very serious, it is fraud to receive money into an account that is not approved by the Federal Government. President Buhari is following the constitution, trying to instill transparency and ensure that people don’t go playing around with government funds.
What is Nigeria likely to benefit from this?
The move would plug loopholes, where hitherto resources were filtered away. If a Ministry, Department or Agency (MDA) has various accounts and doesn’t have a unique one for receiving inflows, it is very easy to tell its clients to pay money into any of its accounts, which is supposed to be illegal. Besides plugging loopholes, it breeds accountability. All inflows are seen the exact way they come in, can be tracked, and proper documentation maintained.
Some people must have benefitted from the old order and may have fought over time for its sustenance across different administrations; how do you think the drain of revenue occasioned by their actions impacted on the economy?
The impact is many and varied. First, when the centre has hands that are not clean, they don’t have the moral authority to give instructions to other people. However, there has to be a strong political will to curb the excesses of these powerful individuals. There were powerful individuals who held the presidency to ransom in the past. There were such people under former President Obasanjo and the immediate past President Jonathan. They could not be touched and were benefitting from the illegality and loopholes in the system. So much money was being filtered from the system. We had a situation where the cost of running Nigerian National Petroleum Corporation (NNPC) was more than that of running the National Assembly.
How many people are in NNPC?
We have to be fair to President Buhari who has shown genuine commitment to transparency. That is why he is putting things in place for the Single Treasury Account.
A lot of money was left unaccounted for and it would have been more beneficial if these monies were reinvested back into the system. The money was leaving the shores of the country. A lot of the money coming through oil, gas and mining are in Dollars. With the way our economy was running, it was not felt when these monies come in. Now we have a policy that discourages Dollar lodgments in banks. Before, people can easily get this money into their accounts in raw Dollars and wire it abroad. First, it was not coming in through unified accounts. A lot of inflows were unaccounted for. In fact, paying money into unauthorized account not resident with the CBN should be made a felony. If monies come in as it did before, plenty of it was going out of the country; it was laundered. In fact, government only realised only 50 per cent of what it was supposed to get as revenue. We had a situation whereby government was using earnings from natural resources for recurrent expenditure. It is not done in any advanced country. We wait for the sale of petroleum to be able to pay salaries?
What should have been the case?
Earnings from natural resources are supposed to be meant for capital expenditure. Taxation should be used to run government; it is what obtains in South Africa, Kenya, The United Kingdom (UK) and Germany. Tax earnings, including excise tax and import duties, are used to pay salaries and run government; pay members of the National Assembly. Earnings from natural resources are supposed to be used for building roads, hospitals, parks, expanding schools, and other infrastructural development options. These are called reproducible resources that should enhance the capacity of the people such that the ordinary farmer has access to good road, water and electricity. He pays minimal dues on all of this and is able to be more productive. We are not even able to implement budgets faithfully because an aspect of our earnings was pilfered away and went down to such depths that it can hardly run the recurrent expenditure.
But there have been arguments that the Single Treasury Account might be too heavy to manage; do you think the fear is real?
The people who advance that argument forget that when the money comes into one purse, there’s better control. With what obtains before, a huge chunk of government earning was not realised. For accountability, any source from which money comes is registered and recorded. MDAs typically draw up their budgets, which would be approved by the National Assembly. If it earns N5bn and runs its operations with N2bn, which has been approved, it means just the approved sum would be released. The N5bn it collects is not its business. Everything is supposed to have been spelt out. It is just like the Federation account; because government had several accounts, it pays whatever it wishes into the account. This was wrong. In as much as the monies are duly lodged into the accounts, registered and documented, it is no one’s business to argue whether it is heavy or not. The records would be there to show.
Before this directive, many banks subsist on lodgments from government activities, how are they expected to fair, going forward?
They have to fight to get more deposits; they have to be realistic. It is not that the monies would not get to them. When government wants to fund projects, it still goes through banks. If a borehole is to be constructed, the money is still lodged in the banks. The influence of banks to scatter government revenues among themselves has been too much. A ministry would have an account with about three to four banks because these banks put pressure on them to open accounts. Ideally, the money ought to flow to federal or state government and the only money the ministries ought to have access to ought to be the ones released as budget.
Banks have a lot of activities already with government. Every Treasury bill and bonds sold are for government, and are money-raising ventures approved through CBN and passed through commercial banks. The deposits of government not just in Nigeria, but in advanced countries, ideally, are lodged with government. It is a means of controlling the money supply in the system.
Money supply is made up of private and public money; and commercial banks can expand money supply by giving out advance loans with the deposited money. If government money with them is stable they can give out loans.
Most of the time, we have huge balances on the basis of which has resulted in large supply of money in the market. This has made the economy very inflationary.
Beside the fact that inflation is caused by broad money supply, we have credits from commercial banks and huge volumes of Dollar in the system because people accept the Dollar as a legal tender in the country. In addition to that, another factor is public money lodged in commercial banks, which used to be from the MDAs through their various mechanisms of revenue collection. But now, that it is going to be removed and with the Dollar properly managed and structured, there would be a positive turn for the value of the Naira. It is going to take shape.
Are there likely going to be any job losses from the move and who are those to be affected?
Job cuts would come from almost everywhere except government. This is because companies would experience crunch occasioned by the drop in demand for products. The freebies that come from the saturation of the market by illegally acquired money would dry up. But as government is organising itself, the money would come in another way. Government earnings would now be bigger because the ones going out of the country would be trapped in.