TSA: Opportunity for a Fledging Economy

Eromosele Abiodun writes that for the government to ensure the continued success of the TSA, it must respect its agreement with banks and the provider of thesoftware used for the transfer of government funds from commercial banks to the CBN

Last week, the Minister of Finance, Kemi Adeosun announced that the N165 billion civil service monthly wage bill is over-bloated and can no longer be sustained by the federal government. The minister stated this in Lagos at a meeting with the Newspaper Proprietors’ Association of Nigeria (NPAN) attended by her counterparts in the Ministry of Information, Lai Mohammed, Ministry of Environment, Ms. Amina Mohammed, and Ministry of Agriculture, Chief Audu Ogbeh.

Adeosun, who provided details on the economic reform agenda of the federal government, said the N165 billion being paid to federal civil servants monthly represented 40 per cent of the total spending of government, reported the News Agency of Nigeria (NAN).

She said the figure was too high and the government was pursuing aggressive measures to detect and prosecute ghost workers and other saboteurs in the system.

“We spend N165 billion every month on salaries and when I came in there was no checking. Now, we have created a unit assigned with the sole responsibility of checking the salaries and catching those behind the over-bloated salaries,” she said.

Adeosun said the Integrated Payroll and Personnel Information System (IPPIS) introduced by the previous administration was defective and sabotaged by the elements benefitting from the salary fraud.
She said many federal government establishments including the police were yet to be captured in the system.
According to her, it was shocking that the Nigerian Railway Corporation (NRC), which is not fully functional, still had 10,000 workers in its payroll serviced by government.

Saving for rainy day
In another forum, Adeosun also faulted the position of her predecessor, Dr. Ngozi Okonjo-Iweala, who had blamed the state governors for the inability of the immediate past administration to save for a rainy day on.
The governors, the former finance minister said, had insisted that all revenues accruing to the federation must be shared, effectively eroding the fiscal buffer that would have shielded the economy from external shocks.

But countering this position, Adeosun pointed out that 52 per cent of the Federation Account allocation goes to the federal government, so if the federal government under former President Goodluck Jonathan had the will to save, it would have saved its own portion of its allocation.
She pointed out that it was unfair for the immediate past administration to always blame the states.

She said the drop in crude oil prices presented a good opportunity to reset the economy, adding that the opportunity for diversification of the economy created by the crisis should not be wasted.

She also spoke on the measures adopted by the federal government to assist state governments that are unable to meet their various statutory obligations.
“Everybody is now extremely sober. Every Nigerian is sober. All the governors have realised that oil prices can plummet from $110 per barrel to $28 per barrel over such a short period of time and we could be so exposed that we cannot even pay salaries. So there is a sobriety that has set in and I don’t think we should waste. We are working very hard with the states and we said to them, first of all we are not bailing them out.

“We have said we would have a fiscal restructuring plan. Whatever we are doing is conditional, they must go and drive efficiency, which means the states must do biometric capture of their staff, know those that are paid, put in efficiency units just as we have done at the federal government level where we are seeing a level of savings that it can generate,” she said.
Continuing, the finance minister pointed out that there is a big misunderstanding about the Treasury Single Account (TSA) and how it operates.

Understanding TSA
TSA is a huge bank account. So what happened was that all the agencies of government closed their accounts in various banks and moved them into a single account at the Central Bank of Nigeria (CBN). Now, at every point in time, the balance on that account is quoted, it can be N3 trillion today, maybe tomorrow it is something else. But that money is everybody’s money.

“The Nigerian National Petroleum Corporation (NNPC), Federation Account Allocation Committee (FAAC) money is in there, and so not all of that money is available for spending. That is, how much of it is a free cash float that can go into the budget. So it is not like everything in the TSA can be spent,” she explained.

Adeosun, nonetheless, stressed that the TSA has given the federal government better control and visibility of its revenue.
On other measures to block leakages, Adeosun said: “We have been borrowing to pay salaries for years and the reason is that revenue is leaking and that is one of the things I am very passionate about sorting out. Let me explain this: at the moment, there are only three lines of federal government revenue that we account for. That is money that comes in from oil, taxes from the Federal Inland Revenue Service and the Customs and Excise Service. All the other revenues of government sit in boards of corporations. And most of them have not been remitting any money into the Federation Account.

“We can’t afford to waste money the way we wasted money in the past. Let me give you a shocking statistic. Last year, we spent N19 billion on roads in the entire federation, but we spent N64 billion on travels. So we set up the Efficiency Unit to look at those expenses. So, for example, we now have industry guidelines through a circular we sent out that a public officer cannot fly first class on government money. You also cannot even travel on business class unless you are a minister or permanent secretary. If you are travelling for government business, why should you travel business class?”

Nigeria is Broke!
These are indeed strange times in the country. That a Nigerian minister cannot fly first class is very strange to say the least. The finance minister failed to say it the Buhari way-Nigeria is broke! As we all know, oil price decline has put a strain on the capital inflow into the economy, pressure on the foreign reserves and exchange rate.

There has also been an increased exit of foreign investors especially in the capital market. According to the Nigerian Stock Exchange’s (NSE), monthly foreign outflows outpaced inflows, which was consistent with the same period in 2015. Total transactions at the nation’s bourse decreased by 17.87 per cent from N117.27 billion recorded in February 2016 to N96.31 (about $0.49 billion) in March 2016. In comparison to the same period in 2015, total transactions decreased by 47.66 per cent from the N184.02 billion recorded in March 2015.

Also, the NSE figures had shown that domestic investors outperformed foreign investors by 28.48 per cent as total foreign portfolio inflows (FPI) decreased from 36.48 per cent to 35.76 per cent over the same period.

The deteriorating macroeconomic environment as well as some earnings-constraining policies from both the monetary and fiscal authorities has seen some commercial banks in the country gasping for breath.

In addition, the persistent scarcity of forex in the economy as the Central Bank of Nigeria (CBN) continues to ration dollar supply through its demand management strategy has increased the risk that banks’ asset quality could deteriorate further. Also, this might cause a lot of the financial institutions to default on their international obligations to correspondent banks and maturing forex obligations in view of the challenges currently facing banks and businesses in the country.

In 2015, the Nigerian economy grew by 2.82 per cent, compared with 6.23 per cent in 2014, signifying a major decline in economic activities across board. The issues surrounding the currency curbs introduced by the CBN and declining disposable income brought on by unpaid wages were responsible for the sluggish growth recorded in 2015.

These emerged just as one of the biggest global rating agencies, Standards & Poor’s (S&P) revised the country’s sovereign credit outlook to negative from stable, just as the country’s total merchandise trade fell to N3.65 trillion in the fourth quarter of last year compared to N4.02 trillion in the previous quarter.

S&P stated that Nigeria’s foreign exchange policy was creating dislocations in product and financial markets, adding that the negative outlook it assigned to Nigeria reflected the possibility of a downgrade in the coming 12 months, “if there is deterioration of Nigeria’s fiscal or external accounts.”

Enhancing government’s revenue
One of the important priority areas for public and private sector has always been how to organise, manage and secure assets deployed to enhance government revenue. This may appear easy, considering the promises of advanced features often reeled out by technology solution providers.

However, many deployments suffer badly from a mismatch between expectations and reality. Often times, greed, egocentric squabbling and a propensity to place personal priorities above national or enterprise ones, lie at the root of the implementation imbroglios.

For instance, the contract between SystemSpecs Limited, provider of the innovative product, Remita, software used for the transfer of government’s funds from commercial banks to the Central Bank of Nigeria (CBN) under the TSA policy of the federal government and the CBN was signed on December 12, 2013 and under the heading ‘Fees Annexure’ spells out the fees to be charged on CBN transactions on the Remita platform.

Under the first heading for ‘e-Payment,’ the contract states that “a tariff of N100 per N1million per transaction” will be charged, of which the CBN would keep 40 per cent while SystemSpecs would have a 60 per cent stake.

With respect to collections on behalf of the federal government, the agreement provides for a tariff of 1 per cent of funds collected to be charged for government revenue collections.

The sharing formula is also clearly stated as: Platform Owner/SystemSpecs – 50 per cent take; Collecting Agents/deposit money banks (DMBs) – 40 per cent while the Introducer/CBN gets 10 per cent of the fees. All fees are stated to be payable simultaneously with the transaction and deducted from the nominated account. Despite this, a few disgruntled elements still rely on sentiment to discredit an effort meant to enhance government’s revenue.

The Chairman of SystemSpecs is Dr. Christopher Kolade, whose credibility as an administrator is generally acclaimed. Kolade was, among other things, the founding chairman of the Subsidy Reinvestment and Empowerment Programme (SURE-P) which was started by the Jonathan administration in 2012.

He resigned as SURE-P chairman in November 2013, citing his age (he was a month away from clocking 81 at the time) as a reason. Kolade, however, explained two years later that he quit the position because SURE-P’s operations were becoming tainted with corruption and politics, thereby losing its credibility.

Emphasis on Foreign Help
The Institute of Software Practitioners of Nigeria (ISPON) recently stated that so much emphasis is placed on foreign software to the detriment of locally developed software, which has been proven severally to have the same international standard with imported variants.

ISPON warned that the country risks the opportunity of not growing her software industry and building a sustainable local and regional market.
It warned that if the trend persists, Nigeria would not be able to build and develop in-country capacity and export software talent the same way Nigeria doctors were outsourced to Saudi Arabia in the 80’s.

“Nigerians should frown on a situation where foreign software is preferred to locally developed software, even when they are tested to meet the same international standards. Also, systems and solutions required to address security challenges would demand and depend on sophisticated software solutions, super-fast networks, powerful computer systems, intelligence analysts, databases and most importantly, indigenous software that understands the nuances of the country, “ISPON added.

Supporting ISPON’s view, the Governor of CBN, Godwin Emefiele explained that the Remita platform is still the cheapest compared to RISS that charges 1.9 per cent, when Remita was appointed as e- payment Solution platform. He said the Nigeria Inter-Banks Settlement System (NIBSS) owned by the CBN was not quite ready to provide the services.

In acquiring a world-class technology like Remita in Nigeria, experts believe there must be a change in the paradigm and thinking of decision makers and policy formulators.

“The considerations in our climes are numerous, and require a cohesive approach to eliminate duplication of expenditure and commercial risks, “said an expert who pleaded anonymity.

Government, he said, should implement a National Database initiative that ensures all critical sectors maintain up to date databases that can be aggregated into a National Data portal.

He added, “Our approach must also focus on encouraging foreign exchange conservation, intellectual capacity development, job creation and capacity retention, while eliminating duplicated expenditure, introduce scale economics and deliver a platform from which comprehensive analytics can be elicited for improved National planning and resource deployment. Without this, we are effectively planning in the dark, or even worse with skewed data baselines.”

FG records N3tn inflow
Meanwhile, while banks whose platforms are used for the collection of funds for the federal government under the TSA are threatening withdraw their services because of the failure of government to honour their contract. The federal government announced last week that it has recorded N3 trillion inflows into the TSA in the first quarter of the year.
Accountant General of the Federation (AGF), Ahmed Idris, disclosed this at ICAN UK International Zonal Conference, in London.

He said as at end of March, 2016, total inflows into TSA was about N3 trillion ($15 billion) while the number of Ministries, Departments and Agencies, MDAs, on TSA has risen to 976. Addressing the global audience on the benefits of the TSA, Idris said the federal government had stopped borrowing from itself as commercial banks use MDAs idle balances to buy treasury bills and other short-term instruments.

According to him, successful TSA implementation rests on a tripod, which includes the collection of MDAs receipts, payment by MDAs and budgetary control of MDAs.

He explained that two core systems supported TSA: Government Integrated Financial Management and Information System (GIFMIS) at the Office of the Attorney General of the Federation and the CBN, and Payment Gateway called Remita at CBN-the two systems were integrated and deployed in 2012.

He said: “TSA became fully operational in April 2012 with 93 pilot MDAs accessing their allocations directly from the Consolidated Revenue Fund Account (CRFA). Incrementally, MDAs on TSA went to 225 (2013), 345 (2014) and 706 (2015). Currently, over 900 MDAs are on TSA.”

While listing the benefits of the TSA, Idris said the adoption of the system provided better information on the cash resources available to government at any point in time and the financing gap that needed to be met.

He said the initiative had instilled fiscal discipline, eliminated the process of cash backing MDAs accounts with commercial banks, and gained economy of scale due since the adoption of the systems by the MDAs instead of investing resources in several ICT platforms. The system has also reduced average monthly ways and means advances of CBN associated costs.