Appraising TSA impact on Nigerian economy
The Federal Government recently revealed that after some couple of months of implementing the Treasury Single Account (TSA), it has been able to save over N4.3 trillion. It has also harmonized the inflow of revenues into the national purse.
The policy, which has irked many public sectors previously benefiting from the old order is, however, promoting transparency and efficiency in public accounting system, NIYI OLAOYE writes.
The TSA is a bank account or a set of linked bank accounts through which the government transacts all its receipts and payments and gets consolidated view of its financial status at any given time.
Before the coming of TSA, handling of the government’s receipts and payments was complex with billions of naira that could have been re-injected into system to lie idle for months in numerous bank accounts while government parastatals borrowing from same banks for their operations. The loans came at exorbitant interest rates, and repayment timelines were frustrating.
Nigeria was in that financial management mess until government approved the full implementation of TSA adopting Remita, electronic payment software developed by SystemSpecs to drive the scheme.
Launched in 2006, Remita is an electronic platform that helps the government, corporate organisations, Small and Medium Enterprises (SMEs) and individuals to make and receive payments without stress. It aggregates multiple bank accounts, giving customers the ability to perform complete e-Transactions.
The TSA policy – initiated by the administration of former President Goodluck Jonathan but implemented by his successor President Muhammadu Buhari’s administration – stipulates that all government taxes, levies and tariffs should be deposited in the Central Bank of Nigeria (CBN).
The funds would subsequently be disbursed to Ministries, Departments and Agencies (MDAs) based on approved rules to ensure accountability in the management of government resources.
On the TSA, CBN’s Banking Supervision Director, Mrs Tokunbo Martins agreed that the policy regime triggered some unintended consequences, affecting the operations of banks, especially regarding deposit depletion, asset quality, decrease in revenues and liquidity stress.
She put the aggregate deposit transferred to the CBN from the inception of the TSA regime to March last year at N2.67 trillion. The total, which represents 15.14 per cent of the total deposits of MDBs of N17.63 trillion as at April 30, constitutes the volume of deposits “lost” by banks as fallout of the implementation of the TSA regime.
Mrs. Martins said: “This loss impacted banks differently in line with the proportion of their balance sheet that was sustained with Federal Government of Nigeria (FGN) deposits.
“Due to its large size and low cost, Federal Government of Nigeria deposits were a huge source of revenue for banks. Although specific data on revenue attributable to FGN deposits is not available, a good proxy is the yield on Treasury Bills, which is currently around 14 per cent.”
She made this known at the CBN-Financial Institutions Training Centre (FITC) continuous education programme for directors of banks and other financial institutions in Lagos.
Martins said assuming the entire government deposits were invested by the banks in Treasury Bills, at the current yield of 14 per cent, it would generate interest income of about N374 billion for the banks. The figure, she said, provides an indication of revenue that is no longer available to commercial banks due to introduction of TSA.
She explained that based on the large quantum of revenue earned from government deposits, majority of commercial banks had created teams with responsibility for mobilising public sector funds.
Her words: “These teams, which were large and significant, were in some cases directly supervised by top management staff. The introduction of the TSA regime and resultant depletion in government deposits and related revenue has made these teams unprofitable and their existence untenable.
“Therefore, most banks had scaled back or disbanded the teams and in extreme cases, released staff deployed to the teams.”
The CBN director said the TSA regime impacted the liquidity level in the banking system due to the attendant remittance of cash, which constitutes a major portion of banks’ liquid assets to the apex bank.
“Furthermore, as part of risk management, banks with large government deposits mitigated their positions by investing the liability in T-bills and Federal Government of Nigeria bonds. These banks had to liquidate these investments in order to comply with the TSA regime, thereby further reducing their stock of liquid assets,” she said.
