What is Treasury Single Account (TSA) System (The Nigeria System)
Earlier in February 2015, the Central Bank of Nigeria issued a circular
directing all deposit money banks to implement the Remita e-Collection
Platform. The Remita e-Collection is a technology platform deployed by
the Federal Government to support the collection and remittance of all
government revenue to a Consolidated Account domiciled with the CBN.
This marked the beginning of the full implementation of Treasury Single
Account (TSA) system in Nigeria.
Though Section 80 (1) of the
1999 Constitution as amended states “All revenues, or other moneys
raised or received by the Federation (not being revenues or other moneys
payable under this Constitution or any Act of the National Assembly
into any other public fund of the Federation established for a specific
purpose) shall be paid into and form one Consolidated Revenue Fund of
the Federation”; successive governments have continued to operate
multiple accounts for the collection and spending of government revenue
in flagrant disregard to the provision of the constitution which
requires that all government revenues be remitted into a single account.
was not until 2012 that government ran a pilot scheme for a single
account using 217 ministries, department and agencies as a test case.
The pilot scheme saved the country about N500 billion in frivolous
spending. The success of the pilot scheme motivated the government to
fully implement TSA, leading to the directives to banks to implement the
technology platform that will help accommodate all MDA’s in the TSA
scheme. The recent directives by President Mohammed Buhari that all
government revenues should be remitted to a Treasury Single Account is
in consonance with this programme and in compliance with the provisions
of the 1999 constitution.
But what is a Treasury Single Account?
a nutshell, a Treasury Single Account is a public accounting system
under which all government revenue, receipts and income and collected
into one single account, usually maintained by the country’s Central
Bank and all payments done through this account as well. The purpose is
primarily to ensure accountability of government revenue, enhance
transparency and avoid misapplication of public funds. The maintenance
of a Treasury Single Account will help to ensure proper cash management
by eliminating idle funds usually left with different commercial banks
and in a way enhance reconciliation of revenue collection and payment.
How will this affect the banking system?
a matter of fact, deposit money banks stand to lose immensely from the
implementation of TSA. This is because of the fact that public sector
funds constitute a large chunk of commercial banks deposit. Indeed, it
is estimated that commercial banks hold about N2.2 trillion public
sector funds at the beginning of sector quarter of 2015. The impact of
this amount of money leaving the system can be imagined when one
considers the fact that each time the monthly federal allocation is
released by FAAC, the banking system is usually awashed with liquidity
and as soon as this public sector funds dries up through withdrawal by
the states, liquidity tightens again with interbank rates going up. Of
major impact will be the movement of funds of revenue generating
parastatals such as the NNPC, out of commercial banks.
In the coming
months, we see a return of deposit ‘wars’ amongst banks as each DMB
devices means of mobilizing funds from the private sector. We see a
return of the era when women are employed by banks specifically for
deposit mobilization and tacitly encouraged to use any means necessary
to get funds. We see increase in deposit interest rates as a major means
of inducing customers and most importantly we see a drop in lending and
in the profitability of banks, at least, in the short to medium term
until they fully come to terms with the impact of the policy and begin
to properly position themselves for true banking business. Ultimately,
we see the share price of these banks falling as investors attempt to
price in the policy impact.
How Is TSA Run?
particular reference to Nigeria, the Central Bank has opened a
Consolidated Revenue Account to receive all government revenue and
effect payments through this account. This is the Treasury Single
Account. All Ministries, Departments and Agencies are expected to remit
their revenue collections to this account through the individual
commercial banks who act as collection agents. This means that the money
deposit banks will continue to maintain revenue collection accounts for
MDA’s but all monies collected by these banks will have to be remitted
to the Consolidated Revenue Accounts with the CBN at the end of each
banking day. In other words, MDA’s accounts with money deposit banks
must be zerorized at the end every banking day by a complete remittance
to the TSA of all revenues collected. The implication is that banks will
no longer have access to the float provided by the accounts they
maintained for the MDA’s. Difference types of account could be
maintained under a TSA arrangement and these may include the TSA main
account, subsidiary or sub-accounts, transaction accounts and zero
balance account. Other types of accounts that could [be] operated
include imprest accounts, transit accounts and correspondence accounts.
These accounts are maintained for transaction purposes for funds flowing
in and out of the TSA.
Benefits of TSA
foregoing, it is obvious that the primary benefit of a TSA is the
mechanism it provides for proper monitoring of government receipts and
expenditure. In the Nigerian case, it will help to block most if not all
the leakages that have been the bane of the growth of the economy. We
have a situation where some MDA’s manage their finances like independent
empire and remit limited revenue to government treasuries. Under a
properly run TSA, this is not possible as agencies of government are
meant to spend in line with duly approved budget provisions. The
maintenance of a single account for government will enable the Ministry
of Finance monitor fund flow as no agency of government is allowed to
maintain any operational bank account outside the oversight of the
ministry of finance.
Improved Public Finance Managemen
the implementation of this programme is a critical step towards curbing
corruption in public finance. This is in line with the commitment of
the current administration to combat corrupt practices, eliminate
indiscipline in public finance and ensure adequate fund flow that will
be channeled to critical sectors of the economy to catalyze development.
Nigerians are excited at the directive by President Buhari as this will
mean that some government agencies that have been known to be
withholding funds from the Federal Government are now under compulsion
to remit monies to federal treasuries. These agencies include: Nigeria
Customs Service (NCS), Nigerian National Petroleum Corporation (NNPC),
Nigerian Ports Authority (NPA), Federal Inland Revenue Service (FIRS),
Nigeria Immigration Service (NIMS), Nigerian Maritime Administration and
Safety Agency (NIMASA), Federal Airport Authority of Nigeria (FAAN)