Before the
implementation of the Treasury Single Account policy (TSA) of the Federal
Government in 2015, it was common practice for some commercial banks to use
government funds in their coffers to purchase government debt instruments. By
‘ploughing back’ these funds into the short end of the government debt market,
these banks made ‘quick profit’ at the expense of government.
Back then,
it was impossible to say with absolute certainty what government was worth in
terms of its deposits with the commercial banks. This was because even some
federal universities had as many as 120 known bank accounts, while other
accounts, with heavy balances, were kept under wraps. By mid-2015, it was
estimated that Ministries, Departments and Agencies (MDAs) operated as many as
17,000 bank accounts scattered across commercial banks. This complicated
shadowy maze fuelled corruption, cost government N4billion monthly in account
management fees, and resulted in unremitted funds, which often went unaccounted
for.
With the
implementation of TSA, the myriad of accounts was collapsed into one account,
domiciled with the Central Bank of Nigeria. In the last 22 months of the
implementation of the policy, it has not only engendered greater transparency
but government is better able to keep tabs on its income, thanks to the
ingenuity of SystemSpecs’ Remita which is responsible for synchronising the
funds into the single account. As of March 2017, the TSA had more than proved
its mettle as it had efficiently handled government transactions to the tune of
N7trillion.
But the
implementation of TSA, which is also practised by countries like Sweden,
Brazil, France, and the United Kingdom, has done more than boost accountability
and transparency. It has also engendered ease of payment for government-related
transactions, improved financial inclusion and drawn attention to the place of
indigenous platforms in managing large-scale complex transactions.
In more
developed climes, successes such as the one recorded by the TSA would most
likely have inspired the authorities to make fintech start-ups play bigger
roles in the financial services space either as entities distinct from or in
collaboration with banks. For instance, in its latest innovative move, the Bank
of England is giving fintech start-ups direct access to the UK’s Real-Time
Gross Settlements systems (RTGS), the British equivalent of TSA.
According to
Bank of England Governor Mark Carney, this is being done to stimulate
competition and innovation in payment services. The British apex bank expects
that the first non-bank or payment service provider will have access, subject
to legislation making its way through parliament and coming into force, by
2018.
With the new
development, tech companies will no longer have to go through selected banks
and other providers for a settlement account with the Bank of England which
allows them to transfer money between different institutions on behalf of
customers. As a precondition for participation, however, fintech companies have
to demonstrate compliance with an established risk management framework. This
is the way to go even in Nigeria as this would further support financial
stability through greater
diversity and risk-reducing payment technologies. But
what do we have instead? At present no one person in government is exactly a
poster child for the TSA, except maybe the President and Vice President. Small
wonder, then, that we have been witnessing pockets of defaults regarding
remittances into the account by some government agencies since the president
took ill.
Meanwhile, a
World Bank paper suggests that the TSA “has become the international good
practice to include as many government-controlled trust funds and
Extra-budgetary Fund within the TSA as legally possible.
“The main
argument is that the government is—or should be—considered to have the highest
creditworthiness in the country, and that an alternative place to hold trust
fund assets is thus sub-optimal. Indeed, many countries have laws which insist
that certain trust assets can only be invested in government obligations.”
But there
are cases in Nigeria where funds are still not remitted to TSA as and when due.
Recently, a Federal High court in Lagos granted an interim order for seven
commercial banks to remit the sum of $793million, allegedly hidden with them in
violation of the TSA policy. The action of the agencies and banks directly
undermines the success of the policy, even though some of the banks have made
attempts to clear their names.
The Federal
Government needs to push ahead with the TSA policy against all odds and enforce
compliance amongst defaulting parastatals/private sector entities such as the
NPA, commercial banks, NHIS, etc that have declined to remit funds in their
custody. This is because if left unaddressed, these pockets of non-compliance
could soon become a tsunami and ultimately undermine and destroy the policy
completely.
Strong
deterrents including appropriate sanction, through fines, suspensions and other
measures should be applied on erring companies or government agencies that
totally or partially flout TSA directives.
The bold and
decisive implementation of the TSA policy is one of the major achievements of
the Buhari led federal government. Even when pessimists feared that the policy
would adversely affect the banking system, those fears have been proved wrong
so far as the policy has resulted in massive savings for government.
There have
been attempts to underscore the key gains of TSA for economic growth but the
administration has to better communicate them to the Nigerian people.
Certainly, TSA frees up more funds for developmental projects. However, World
Bank literature suggests that there are eight other major gains from a well
implemented TSA policy.
A well
implemented TSA policy, according to the World Bank, ultimately improves
appropriation control, reduces bank fees and transaction costs, improves
operational control during budget execution, enables efficient cash management,
facilitates efficient payment mechanisms, improves bank reconciliation and
quality of fiscal data, lowers liquidity reserve needs and allows complete and
timely information on government cash resources.
Most of
these have been achieved through the Nigerian experience. And because of this
success it behoves the government not only to strengthen the policy but also to
see to it that other African countries adopt it. Because that is the logical
thing to do to improve transparency on the African continent.
Ejiofor is a
public affairs analyst based in Benin City
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