TSA to check cost of excess liquidity, idle funds in
Experts express optimism over new fiscal policy tool
The new fiscal policy enhancement tool- Treasury Single Account (TSA), may have been described as panacea to increasing cost to the economy, arising from excess liquidity mop up, frequently carried out by the Central Bank of Nigeria (CBN).
Besides, it is also expected to put in check the assessed round tripping of public funds deposited in various accounts in banks, which unconfirmed reports have put at about N3 trillion.
TSA, which the International Monetary Fund (IMF) defined as unified structure of government bank accounts through which the government transacts all its receipts and payments, has however, elicited positive comments from stakeholders with the Presidential directive last week.
The directive marks the commencement of retirement of revenues due to the Federal Government into a unified account maintained by the Central Bank of Nigeria (CBN) by Ministries, Departments and Agencies (MDAs).
Already, government said the implementation of the TSA by all MDAs would enable compliance with provisions of the Constitution and in line with the full compliance of MDAs accounts to relevant laws on accounting, allocation and disbursements.
“We view the implementation of the TSA as a major fiscal policy management reform milestone with several benefits. From a policy point of view, TSA will bring about a consolidated view of government accounts and aid efficient management of government cash flow — receipts and payments.
“This will enable increased transparency of government finances as relevant fiscal and monetary agencies will have more oversight of MDAs’ accounts and cash positions.
Furthermore, the implementation will save the CBN the burden of mopping excessive liquidity (at expensive rate) caused by government revenue allocation and distribution to her MDAs.
“More importantly, the TSA will check round tripping of government deposits by Deposit Money Banks (DMBs) due to the arbitrage between government deposits (bearing close to zero per cent interest rate) and government borrowing (at over 13 per cent interest rate cost to the government),” the Head of Research at Afrinvest Securities Limited, Ayodeji Eboh said in a note to The Guardian at the weekend.
Indications had also emerged that before the official Presidential directive, the Nigerian National Petroleum Corporation (NNPC) had begun withdrawing its funds from banks for retirement with the CBN.
The Managing Director of Cowry Asset Management Limited, Johnson Chukwu, said the move would allow the government to see at a glance the daily revenues being generated by its agencies as well as identify negative variances and also eliminate the possibilities of diversion of government revenue.
“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.
“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 only challenge would 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.
“Of course, banks’ net liquidity position will reduce and as well constrain their ability to create credits. This will invariably affect their profitability,” Chukwu said.
Also, the Lead Director of Centre for Social Justice, Eze Onyekpere, corroborated the sentiments, saying the move by government comes with 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.
“The practice before the TSA, where MDA “A”, based on budgetary releases could have surplus cash (meaning cash that is not immediately required) in its bank accounts, while MDA “B”, which needs immediate cash for urgent transactions is cash starved and has little or nothing in its account would no longer happen.
“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 gain will be over.
The 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.
“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,” Onyekpere said.
Already, Eboh said the move had exerted impact on the liquidity level in the banking system, resulting in a surge in money market rates during the period mooted plans, as banks scrambled for funds to cover positions.
Analysing the development, he noted that data from the CBN as at June 2015, put total deposits (demand, time and savings) at N13.5 trillion, with the private sector accounting for 90.7 per cent (N12.2 trillion), while public sector funds accounts for 9.3 per cent (N1.3 trillion).
Further breakdown of the total deposits shows that Federal Government deposits make up 5.3 per cent (N712.6 billion), while state and local governments account for 3.1 per cent (N424.3 billion) and 0.9 per cent (N121.0 billion) respectively.
Taken together with other regulatory guidelines such as the Liquidity Ratio (pegged at 30 per cent), full implementation of the TSA will isolate approximately 5.3 per cent of the available liquidity in the banking system, although this may vary across banks based on their respective exposure to public sector deposits.