TSA: Federal Govt rakes in N4.3tr in 15 months

Attempts by the Federal Government to adopt the Treasury Single Account (TSA) were unsuccessful for years – no thanks to poor technological capacity to manage the retail aspect of the policy. The trend persisted until SystemSpecs came to the rescue with the deployment of Remita, which processes over $30 billion transactions yearly. In just 15 months into its implementation, the TSA has fetched the government a pincely N4.3 trillion. COLLINS NWEZE lists the gains of TSA in public accounting.

THE handling of the government’s receipts and payments is complex in not a few developing countries. In such countries, the ministries of finance/treasury lack unified view and centralised control over government’s cash and resources, prompting the cash that could have been reinjected into system to lie idle for months in numerous bank accounts.

Even as revenue-generating Ministries, Departments and Agencies (MDAs) hold on to cash, the government goes cap in hand to borrow at exorbitant interest rates to implement its budget.

That was the case with Nigeria until September last year when the Federal Government began the full implementation of the Treasury Single Account (TSA) policy driven by the Remita, payment software developed and deployed by SystemSpecs to drive the policy.

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.

In just 15 months after its full implementation kicked off, the policy has shored up the government’s earnings by N4.3 trillion. 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.

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 MDAs based on approved rules to ensure accountability in the management of government resources.

Several attempts to adopt TSA in the past were unsuccessful. Reason: the CBN lacked the technological-know-how to manage the retail aspect of the policy. An e-technology platform, Real-time gross settlement systems (RTGS), initially expected to drive the payment leg TSA policy in Nigeria was unsuitable for retail payments.

But, the game changed when SystemSpecs brought in Remita, the payment gateway, powering the TSA, to handle the transactions. Less than one and half years after its introduction, Remita has helped the government to identify and close over 17,000 accounts belonging to MDAs’ and transferred the recovered funds to the TSA.

Deposit Money Banks (DMBs) have also been constrained to diversify their sources of deposit mobilisation rather than rely on these idle funds which yielded interest for faceless individuals and groups, even as the government groaned under paucity of funds.

Analysts believe that the TSA has helped Buhari administration’s anti-corruption fight by flushing out ghost workers and saving the economy from imminent collapse.

“Remita processes over $30 billion worth of transactions every year, and that’s just within Nigeria,” SystemSpecs’ Executive Director , Deremi Atanda, said at the yearly Gulf International Technology Exhibition (GITEX) in Dubai, United Arab Emirate (UAE).

He went on: “There’s also a roadmap to take Remita to Africa. So, if you have a vision to be part of revolutionising payments in Africa at whatever level, driving financial inclusion at the national level, savings, micro-savings and micro-transactions, Remita is best placed to help you achieve that.”

According to him, Remita has been at the forefront of driving the national Financial Inclusion Policy (FIP), and it is being used by about 500 micro-finance banks to meet the needs of many Nigerians who lack access to commercial banking services, empowering them to extend financial services to unbanked individuals.

Vice President Yemi Osinbajo corroborated Atanda’s assertion from the cost-saving perspective. In August, he disclosed that 40,000 ghost workers had been flushed out of the public service, due to the adoption of the TSA which is powered by Remita. The translates to a monthly saving of N720 million and N8.64 billion yearly at the prevailing N18,000 minimum wage.

Remita has instilled fiscal discipline that allows government to have control over budget allocations, while providing multiple entry points for collections.

The implementation of the TSA policy has significantly reduced government’s debt servicing costs, lowered liquidity reserve needs, and fostered effective use of surplus cash.

Going forward, SystemSpecs is poised to tap into McKinsey’s projection that payments and financial services delivered via mobile phones and the Internet could transform individuals’ lives and economic prospects businesses and governments across the world.

The mobile version of its software is slated for launch before the end of the year. It is aimed at making financial inclusion a reality.

SystemSpecs was engaged to provide the payment gateway for TSA in 2011. While the payment leg of TSA began in January 2012, the collection component did not start as scheduled due to the resistance from some quarters and the absence of the political will to push the policy through.

Besides the issue of fees on transactions, there were also complaints that the Remita platform delays the payment plans of MDAs that rely on it to initiate and approve payment transactions.

Presenting a paper at a workshop organised in Abuja by the Office of the Accountant-General of the Federation and the World Bank, Prof. Stephen Ocheni said achieving efficient allocation of resources and the stabilisation of the business cycle remained great challenges facing most parts of the world, particularly developing countries like Nigeria.

In the paper obtained by The Nation and titled: “Treasury Single Account: A catalyst for public financial management in Nigeria”, Ocheni of Public Sector Accounting, Kogi State University, Anyigba, said: “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 minimise the cost of government borrowing and maximise the opportunity cost of cash resources. This requires that cash received is made available for carrying out government’s expenditure programmes and making payments in a timely manner.”

The Buhari administration has initiated and implemented the TSA and other economic policies for better management of national resources and the fight against corruption. Besides the TSA, the government also introduced the Government Integrated Financial Management Information System (GIFMIS), Automated Accounting Transaction Recording and Reporting System (ATRRS), Integrated Payroll and Personnel Information System (IPPIS), International Public Sector Accounting Standard (IPSAS), among others to promote public financial management systems.

The government began TSA implementation with the e-Payment component in April 2012 and its e-collections components followed in January, last year. In September 15, 2015, the government set a deadline for full compliance with the policy by all MDAs.

According to Ocheni, the policy facilitates better fiscal and monetary policy coordination as well as better reconciliation of fiscal and banking data, which in turn improves the quality of fiscal information. The TSA also cuts the debt servicing costs and eradicates financial misappropriation in the public sector.

His words” “The full implementation of the TSA will not be hurting banks. It will only hurt establishments that purport and pretend to be banks but have failed 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, keep them safe; engage in intermediation to create wealth and jobs for the economy and in the process earn profit for themselves.”

Beyond transparency and accountability, the TSA introduces 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.

He said the TSA policy must be accompanied with a Fiscal Sunshine Bill, which if enacted, will open up government’s financial activities in a way that there will be no more hiding place for economic saboteurs for it to be maximised.

With a 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.

The SystemSpecs chief said: “The TSA enhances the transparency of the government’s banking arrangements by ensuring that all end-of-the-day balances are electronically swept into the TSA.

Establishing a TSA may require hard decisions, such as closing the existing bank accounts of spending units, therefore for a successful TSA implementation, explicit and strong support for reform of government banking arrangements by the Federal Government is recommended.”

The McKinsey report

The McKinsey report for September 2016 tagged: “Digital finance for all: Powering inclusive growth in emerging economies’, forecasts that “widespread adoption and use of digital finance could increase the Gross Domestic Products (GDP) of all emerging economies by six per cent, or a total of $3.7 trillion, by 2025.”

It explained that the additional GDP will generate 95 million jobs across all sectors of the economy, provide access to 1.6 billion unbanked people, while governments could gain $110 billion yearly by reducing leakages in public spending and tax collection.

Besides, the KPMG FinTech Report Nigeria is fast becoming a dynamic ecosystem bursting at the seams with opportunities for FinTech start-ups.

Impact on banks

Speaking 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 this 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 the disclosure at the CBN-Financial Institutions Training Centre (FITC) continuous education programme for directors of Banks and Other Financial Institutions, held in Lagos.

Mrs Martins said that 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 FGN 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.

Mrs. Martins explained that with the introduction of the TSA regime, easy and risk-free revenue that was hitherto available to banks via investment of government deposits in Treasury Bills and Government Bonds had been restricted.

“Therefore, banks must become innovative in generating revenue to support their operations and provide returns to their shareholders. This development also presents an opportunity for banks to return to their traditional role of savings aggregation and financial inter-mediation. Banks should thus strive to increase the size of their loan books in order to increase their interest and fees income,” Mrs Martins said.

The CBN director in charge of Banking and Payments, ‘Dipo Fatokun, said there were no exemptions given to any MDA on TSA implementation.

He said: “On the issue of whether there are exceptions on the TSA or not, for the Federal Government, there are no exemptions. All MDAs are expected to be part of the TSA but we need to clarify something. Even under TSA, banks customers are not expected to walk up to the CBN to make deposits.

“So, even under TSA, the MDBs still have a role to play. The only thing is that they are not expected to keep those balances, they still have those accounts.”

He said that cash deposits, or transfers can be made by companies or individuals into an MDA account in a commercial bank and the fund is subsequently swept to a Federal Government designated account domiciled in the CBN.

The commercial banks have a mandate to transfer that money to the account in the CBN, having deducted its charges which have not been agreed on.

He disclosed that the Federal Inland Revenue Service (FIRS) and Customs had their accounts with the CBN, long before the implementation of TSA began.

“So, if you go to a bank and make payment to Customs duties, the money does not sit in the bank; it actually flows into the CBN, same with the FIRS and that is why even when the TSA was deployed, there was little or no noise about these organisations because all their revenues have actually been coming to the CBN,” Fatokun disclosed.

The CBN, he said, has been monitoring the banks to ensure full compliance with the TSA rule.

Heaid: “We are checking the banks. We have about four departments checking on the banks. For TSA specifically, we have the Other Financial Institutions (OFIS) and Banking Supervision, Financial Policy and Regulation, Consumer Protection departments monitoring the banks.

“They monitor various assets and operations because these are related and the management is informed. And I know that with the penalties and sanctions that the banks have suffered for breaching the TSA, I do not think any of them would want to dare us.”

SystemSpecs’s Chief Executive Officer, John Obaro, said revenues collections came from 17,000 MDAs’ accounts under the TSA project.

He said the funds came from deployment of Remita, which has reduced government’s debt servicing costs, lowered liquidity reserve needs and boosted effective use of surplus cash.

Obaro said his firm would continue to deliver on the TSA service terms of contract with the CBN despite being owed its earned fees on e-collections.

He disclosed that some bank branches have started to turn down collection of government deposits due to the non-payment of these agreed fees.

Obaro said: “From our end, we have continued to provide and support the Remita platform, 24 hours a day and seven days a week, for use by citizens for all their payments to the Federal Government. Our continued support for the TSA is fuelled by our belief in the enormous benefits the Remita software brings to the implementation of TSA to the average citizen.

“We must admit though that we are excited and further driven by the fact that our indigenous Remita software has succeeded in powering the technological backbone for such a successful and strategic national initiative, along with other well meaning Nigerians, we do not want this to fail.”


Source : The Nation

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