TSA Impact Beyond Corruption

Peter Uzoho writes that the introduction of the Treasury Single Account policy by President Muhammadu Buhari’s government has helped to curb corruption in the system

Year 2016 in review
The Treasury Single Account (TSA) is touted as President Muhammadu Buhari’s single most important achievement. Though received with mixed feelings in many quarters, analysts say the policy has had a profound impact on the economy just over a year after its full implementation.

Stakeholders have attributed the Federal Government’s recovery of N4.3 trillion of its cash assets to its successful adoption of the TSA, including the elimination of over 40,000 ghost workers from the public sector as well as the government’s newfound ability to keep tabs on its financial position without hassle. A recent Economist report discloses that the TSA has replaced a “labyrinth” of piggy banks and given Nigeria more control of its earnings, serving as a lesson in transparency to other African countries.

The TSA is a unified structure of government bank accounts that gives a consolidated view of government cash resources. It is based on the principle of unity of cash and treasury through which the government transacts all its receipts and payments. Gratifyingly, the TSA is ratified by section 80 (1) of the 1999 Constitution, which stipulates that all revenues raised or received by the federation …shall be paid into and form one Consolidated Revenue Fund (CRF) of the Federation.

Pan-African Fiscal System
The TSA policy may be new in Nigeria, but Africa is not exactly a stranger to the policy. In 2005, Rwanda adopted a zero-balance drawing system which requires that its ministries and budget agencies’ accounts are held in the National Bank of Rwanda. The policy stipulates that all ministries and budget agencies begin a new fiscal year with zero cash balance on their accounts. Thus, cash transfers are made from the treasury to the ministries’ accounts monthly, and the financial transactions they (ministries) make are restricted to their allocations for the month. To make the policy more fool-proof, daily checks are conducted to ensure that whatever funds left at the close of business are transferred to the Treasury for re-issue the following day to drive transparency.

Uganda adopted its TSA policy in 2013 in accordance with section 4 (1) of its Public Finance and Accountability Act (2003) which states that “the Minister responsible for Finance is responsible for maintaining transparent systems which, among others, ensures the efficient and cost effective cash management of the Consolidated Fund, any other fund established under the Act and other public moneys.” The policy in Uganda started out aggregating all government cash balances into a set of linked bank accounts, with the long-term plan being a single bank account where all revenues would flow from and payments made. Before the adoption of the policy, the country’s MDAs operated over 2000 accounts which were dormant and became a breeding ground for corruption and misappropriation of public funds.

Last year, Kenya announced its proposed adoption of a TSA policy in reaction to the loss of billions of dollars in its public system. Its earlier Integrated Financial Management Information System (IFMIS) had proved ineffective in waging and winning this war, much like previous financial management systems had failed to curb corruption in the Nigerian public sector. Thanks to its TSA policy, Kenya proposed National Treasury and County Treasury Single Accounts, which would both be housed at the Central Bank of Kenya and align with the government’s renewed technological focus.

McKinsey-approved System
One year after its implementation, the TSA has given teeth to the Federal Government’s tough stance on anti-corruption. However, experts argue that the TSA is more than just an anti-corruption tool, but is fast developing data-based administration of public funds, setting the stage for Nigeria’s inclusion in the comity of nations practising e-Governance. They cite a recent McKinsey report which argues that evidence-based governance is the future and will increase in the run-up to 2020.

The report, tagged ‘Policy in the Data Age: Data Enablement for the Common Good’, explains that digitalised governance “gives governments the tools they need to be more efficient, effective and transparent while enabling a significant change in public policy performance management across the entire spectrum of government activities.”

IMF-endorsed Fiscal Policy
The International Monetary Fund (IMF) has been vocal in its endorsement of the policy as a pre-requisite for cash management, treasury oversight and centralised monitoring of government’s cash resources in the modern economy. The IMF argues that the policy is an essential tool for government cash management. In a recent report, it says the TSA enhances the overall effectiveness of a public financial management (PFM) system, and should form a crucial part of public financial management reforms. According to the IMF, a country with fragmented government banking arrangements pays for its institutional deficiencies in multiple ways: “First, idle cash balances in bank accounts often fail to earn market-related remuneration. Second, the government, being unaware of these resources, incurs unnecessary borrowing costs on raising funds to cover a perceived cash shortage. Third, idle government cash balances in the commercial banking sector are not idle for the bank themselves, and can be used to extend credit. Draining this extra liquidity through open market operations also imposes costs on the central bank.”

Control of Budgetary Execution
If the revolutionary changes made by the TSA are any indication, Nigeria may very well circumvent the IMF’s dire projections. Powered by indigenous software Remita, the TSA has gone beyond basic financial services to make government compliance with budgetary allocations the norm rather than the exception. Case in point was the recent tussle between former Governor of the Central Bank of Nigeria (CBN) and Emir of Kano, Muhammadu Sanusi II, who claimed that the Federal Government had overdrawn its funds in the TSA to the tune of N4.7 trillion. He said this was in violation of the Central Bank Act of 2007 (Section 38.2).

Thankfully, the argument was short due to the system of accountability that the TSA has brought to the administration of public funds. The records showed that as of December 2, inflows into the TSA stood at N4.4trillion, out of which government only actually spent N1.913trillion. This systematic record-keeping was well-nigh impossible before, but has come to stay with the adoption of the TSA which keeps the government on top of its finances at any point in time.

Payment Automation
In line with experts’ arguments for digitalised governance, the TSA has made payments to the Federal Government much easier and traceable. As against the practice of only making payments through commercial and microfinance banks, customers can now do so through alternative channels such as POS terminals, debit/credit cards, online banking sites and digital wallets, among others. Unlike before, government can now receive funds from any part of the country, and pay salaries without the need to upload salary schedules from separate software to the e-Payment platform.
Moreover, MDAs make less deals with physical cash and contractors are paid for their services much faster since they are no longer obliged to wait for cheque clearances before executing projects of national importance.

Deposit Mobilisation
Meanwhile, the TSA has eliminated commercial and microfinance banks’ use of public funds for investment purposes. It has reduced the amount the Federal Government loses in interest rates on borrowing from commercial banks, triggering innovation in deposit mobilisation in the banking sector. Industry experts observe that Nigerian banks are having a hard time staying afloat following the closure of 17,000 accounts necessitated by the TSA. However, they add that the policy has roused DMBs from their dependence on the interest from government deposits to a renewed focus on other sources of income.

“The TSA is a sound policy directive which has had meaningful impact on fiscal reform by plugging leakages within the system,” Tunde Mabawonku, Chief Financial Officer, Wema Bank, told newsmen in a recent interview. “The policy sterilised about N1.2 trillion from the banking sector through the CBN, cutting the Cash Reserve Ratio (CRR) from 31 per cent to 25 per cent, while injecting about N740 billion into the system.”

Though tough, this development has had a positive impact on the banking industry. With the unavailability of funds to trade with, banks are said to be making frantic efforts to fill the gap. The Nigeria Interbank Settlement System (NIBSS) recently disclosed that total savings accounts rose from 59.737 million as of January to 65.435 million by the end of September, 2016.

MDA Monitoring
The TSA has fast-tracked MDAs’ compliance with the e-payment and cashless policy of the CBN, allowing the government to monitor the financial activities of over 900 MDAs from a single platform. The policy has eliminated the process of cash backing MDA accounts with commercial banks, eliminating corruption and ensuring timely reconciliation of MDA accounts.

Recently, the Bauchi State government announced its resolution to adopt the policy as a way of further blocking leakages and wastages in ‎its MDAs. The state Commissioner of Finance and Economic Development, Alhaji Garba Sarki Akuyam reportedly told newsmen that the decision was hinged on‎ ensuring accountability and prompt remittance of revenues by all revenue-generating MDAs because “the TSA has proven to be an effective tool of ensuring transparency and prudence in government’s financial dealings.”

Records and Statistics
The data functions of the TSA extend beyond fiscal management; it includes statistics on alternative revenue streams such as levies and fines which are typically paid into the account. Recently, the Federal Road Safety Commission (FRSC) announced the arrest of 7,645 traffic offenders between January and November, 2016. The State Sector Commander, Mr. Wobin Gora, told newsmen that the offenders violated traffic rules and regulations, narrowing this down to worn-out tyres, failure to use seat belts and fake or expired driver’s licences. This system of data gathering reinforces the benefits of the TSA and the McKinsey projection that governance of the future will be digitalised and evidence-based.

The Future
The TSA continues to take a lot of flak from a cross section of the public despite what some list as its many gains. Some months ago, the Sports Ministry claimed it was unable to remunerate the sports team who participated in the Rio Olympic Games because its funds were domiciled in the TSA. The Academic Staff Union of Universities (ASUU) took issue with the policy as well, alleging that lecturers were unable to access foreign grants and other perks due to the TSA which was undermining their autonomy. The Trade Union Congress (TUC) is currently making the same argument for the National Health Insurance Scheme (NHIS), saying that its funds are trapped in the TSA and the NHIS is in danger of failing if the government does not exempt it from the TSA.

“The TSA is in the best interest of the larger economy as it will help in reversing the current high level of debt service expenditure and also reduce the upward pressure on interest rate, exchange rate and inflation,” President Buhari was quoted as saying at the 10th Banking and Finance Conference recently.

He admitted that the government was fully aware of the unpleasant business environment in which both the private and public sectors operate, while assuring that the challenges would be plugged soon. This may very well be the expectations of stakeholders as the nation collectively turns the chapter on 2016.