Date: 2015-08-23

The adoption of a Treasury Single Account (TSA) by the federal and some state governments is seen by many as aimed at plugging loopholes in the system, report Ibrahim Apekhade Yusuf and Nduka Chiejina

THE SINGLE ACCOUNT CLUB

*Federal Government

* Akwa Ibom

*Kaduna

*Kwara

*Lagos

For those who are still wondering how the President Muhammadu Buhari government would unravel, it is all in the open. In the last three months since he mounted the saddle, event watchers are indeed convinced that there is a new sheriff in town in a manner of speaking, judging by some of the far-reaching measures already being taken by his administration.

Clearly, one of such policy pronouncements by Buhari is the directive that each and every Federal Government Ministry, Department or Agency should start paying into a Treasury Single Account (TSA) all government revenues, incomes and other receipts.

A Treasury Single Account is a unified structure of government bank account enabling consolidation and optimal utilisation of government cash resources. It is a bank account or a set of linked bank accounts through which the government transacts all its receipts and payments and gets a consolidated view of its cash position at any given time.

A TSA therefore is considered a prerequisite for modern cash management and is an effective tool for the ministry of finance/treasury to establish oversight and centralized control over government's cash resources. The TSA provides a number of other benefits and thereby enhances the overall effectiveness of a public financial management (PFM) system. The establishment of a TSA should, therefore, receive priority in any PFM reform agenda.

What TSA aims to achieve

According to the directive, this measure is specifically to promote transparency and facilitate compliance with sections 80 and 162 of the 1999 Constitution. In a statement by Laolu Akande, the Senior Special Assistant to the Vice President on? Media and Publicity, all receipts due to the Federal Government or any of its agencies must be paid into TSA or designated accounts maintained and operated in the Central Bank of Nigeria (CBN), except otherwise expressly approved.

The presidential directive, in the view of analysts, would end the previous public accounting situation of several fragmented accounts for government revenues, incomes and receipts, which in the recent past has meant the loss or leakages of legitimate income meant for the federation account.

President Buhari had earlier promised state governors at the inaugural meeting of the National Economic Council (NEC), in June, that all revenues prescribed for lodgement into the federation account will be treated as such under his watch and that he will ensure strict compliance with all relevant laws on accounting, allocation and disbursement.

Since then the presidency has worked with relevant agencies of the federal government to evolve this policy directive. This directive applies to fully funded organs of government like the Ministries, Departments, Agencies and Foreign Missions, as well as the partially funded ones, like Teaching Hospitals, Medical Centres, Federal Tertiary Institutions, etc.

Agencies like the Central Bank of Nigeria, Securities and Exchange Commission, Corporate Affairs Commission, Nigeria Ports Authority, Nigeria Communications Commission, Federal Airports Authority of Nigeria, Nigeria Civil Aviation Authority, Nigerian Maritime Administration and Safety Agency, Nigeria Deposit Insurance Corporation, Nigeria Shippers Council, Nigeria National Petroleum Corporation, Federal Inland Revenue Service, Nigeria Customs Service, Mining, Minerals and Sustainable Development, Department of Petroleum Resources are also affected.

For any agency that is fully or partially self-funding, Sub-Accounts linked to TSA are to be maintained at CBN and the accounting system will be configured to allow them access to funds based on their approved budgetary provisions.

History of TSA in Nigeria

Judging by the provisions of the Financial Regulations (FR) and the 1999 Constitution of the Federal Republic of Nigeria, some Ministries/Extra-Ministerial Offices, Agencies and other arms of Government collect revenue (such as Value Added Tax (VAT), Withholding Tax (WHT), fees, fines and interest) are expected to remit same into the Consolidated Revenue Fund (CRF).

In line with Section 16 of the Finance (Control and Management) Act, LFN, 1990 and the Financial Regulation N0. 413 (i), all unexpended recurrent votes for a financial year shall lapse at the expiration of the year. Consequently, all unspent balances in the Recurrent Expenditure Cash Books at the end of 2012 financial year must be paid back to the Consolidated Revenue Fund Account N0. 0020054141107 with CBN by issuing mandate in favour of "Sub-Treasure of the Federation", Federal Sub-Treasury, Ladoke Akintola Boulevard, Garki II, Abuja latest by the close of work on the last Friday of every December. It should be noted that all MDAs, including Universities, Polytechnics, Federal Medical Centres, Teaching Hospitals, Research Institutes and River Basin Development Authorities and FPO's were ordered to adhere strictly to this law.

All Accounting Officers are required to make a return of unspent balances on the recurrent expenditure Cash Books, along with copies of treasury Receipts, to reach the Office of the Accountant-General of the Federation latest by close of business on Monday, 31st December, 2012. It is obligatory to comply with this regulation in order to avoid the imposition of stiff penalties against defaulters. The irony, however, is that some parastatals did not remit their operating surpluses into the CRF as provided by the FRA 2007 (S. 22 and 23) while most MDAs engage in acts that result into loss of government revenue.

Arrangements for closing the year accounts

All into the Departmental Vote Expenditure Allocation (DVEA) Books, Ledgers, Mandate Summary Registers and Imprest Accounts shall be concluded on the last Friday of December, every year by 12 noon to rule-off all cash Books and extract the Cash Book balances. "All MDA on GIFMIS/TSA will have their accounts closed automatically on – line real time basis by the Treasury."

In October 2012, President Goodluck Jonathan had stated that by introducing the TSA his administration had "not only brought down the fiscal deficit, we have enhanced the predictability of public expenditures. Our Integrated Payroll and Personnel Information System (IPPIS), Government Integrated Financial Management Information System (GIFMIS), improvement in Cash Management System through Treasury Single Account (TSA), and other non-financial Reforms, have greatly improved the Nation's Financial Management System and accountability"

However, in 2013, the federal government began the mop up of funds released under the 2013 budget that were yet to be spent by Ministries, Department and Agencies of government. The development was confirmed by the then Accountant General of the Federation, Mr. Jonah Otunla. Otunla while addressing journalists in company of the then Director General, Budget Office of the Federation, Dr Bright Okogu, however, noted that funds for constituency projects would not be among the funds that would be returned to the treasury.

He said officials of the ministry of finance and the OAGF would ensure that funds that have not been used by agencies were returned before midnight of December 31. According to him, "our people are on the field in the various ministries, and usually officials from the ministry of finance do not sleep on the last day of the year. So we will wait for them to come. Usually issues like personnel costs are not always mopped up. Then also government has decided that constituency projects because of their special interests will not be mopped up too."

He said for agencies that are on the Treasury Single Account, officials of the OAGF do not need to leave the office to go and mop up the fund as this is done electronically since the fund is in the Consolidated Revenue Fund. He then disclosed that from 2014, all agencies that are funded by government would be on the TSA adding that this would simplify the process of mopping up unspent funds.

The policy on TSA he explained was intended to curb the financial excesses of some MDAs that have been refusing to remit their earnings deposited in commercial banks to the federal government which is constrained to go a-borrowing from banks at very high interest rates. Otunla wondered if it was reasonable that the federal government's money be kept with banks by MDAs while the federal government goes to borrow money to finance budget deficit from banks and other sources. "This is quite absurd," he said.

In October 2013, former minister of finance Ngozi Okonjo-Iweala explained that the introduction of TSA had helped to reduce how government account was being overdrawn. She said, "93 MDAs had hooked on to the TSA platform while government's overdrawn position has dropped from ?102 billion in 2011 to ?19 billion in 2012."

How CBN reinforced need for TSA

In November 2013, The Central Bank of Nigeria (CBN) called for an urgent implementation of the Treasury Single Account (TSA) in order to properly manage the country's revenue. The CBN stated this in a communiqué at the end of its 235th Monetary Policy Committee (MPC) meeting where it noted that "a TSA is an essential tool for consolidating and managing governments' cash resources. In countries with fragmented government banking arrangement, the establishment of a TSA receives priority in the public financial management reform agenda."

The CBN lamented that the "erosion of the fiscal buffers through the depletion of the Excess Crude Account (ECA) has further exposed the economy to vulnerabilities while the fall in oil revenue has left capital inflows as the only source of external reserves accretion."

It also expressed concern that the federal government's debt had also risen phenomenally along with its deposits at the deposit money banks. This, it said, showed the federal government as a net creditor to the system. "This underscores the urgent need for the immediate implementation of the Treasury Single Account. The continued delay in returning government accounts to the Central Bank is adding to the huge cost of government debt due to poor cash flow management," the MPC statement added.

Recently, the Office of the Accountant -General of the Federation (OAGF) directed all Ministries, Departments and Agencies (MDAs) of the Federal Government yet to comply with the Treasury Single Account (TSA) regime domiciled at the Central Bank of Nigeria (CBN) to embrace the policy not later than 28th February, 2015. By implication, the MDAs were directed to close all the revenue accounts they maintain in different Banks in the country and transfer the proceeds to the TSA.

This no doubt was a move to actualise the promise by the then federal government through the Coordinating Minister of the Economy and Minister of Finance, Dr. Okonjo-Iweala in December, 2014 to block avenues of revenue leakages to shore up government revenue in the face of dwindling earnings due to falling oil prices.

A clarion call

Like MDAs many states across the federation are also obeying the clarion call to maintain and run a single treasury account. Leading the pack of these change-seekers is the Kaduna State Executive Council under Governor Nasir El-Rufai.

Just like El-Rufai, his counterpart in Lagos, Governor Akinwunmi Ambode also approved the operation of a single account in the state effective September 1, 2015. In a statement by the Permanent Secretary/Accountant General of the state, Mrs. Abimbola Umar, the state government took the decision to address the challenges previously faced with the operation of the multiple account system.

The statement said the operation of a Treasury Single Account (TSA) aside providing transparency and accountability would also encourage taxpayers to request for a single account before making their payments. The development is in line with the objective of the move by the All Progressives Congress (APC)-led Federal Government under President Buhari to ensure that all government revenue accrues to one consolidated account.

In addition, all the affected revenue collecting banks have been mandated to immediately close all existing multiple revenue accounts domiciled in their banks to give room for a single revenue accounting system in line with the accountability and transparency policy of the current administration.

"With this development, it is expected that all parastatals, local governments and establishments will commence the operation of the TSA on September 1, 2015," the statement said. Not to be undone, Akwa Ibom State Executive Council has also approved a Single Revenue Account for all monies collected by Ministries Departments and Agencies in the state.

Addressing reporters in his office, the Commissioner for Information and Communications, Mr. Aniekan Umanh, said this was part of the decisions reached at the weekly Executive Council meeting in Uyo, where the Governor in Council, Mr. Udom Emmanuel presided.

According to the Commissioner, the decision to operate a single revenue account was reached by Council, in order to ensure effective monitoring and efficient management of monies collected on behalf of the State Government. Mr. Umanah also hinted that Council directed the Ministry of Rural Development to "immediately determine the number of villages yet to be connected to the national grid for urgent action," in view of the fact that the State has achieved about 18-hour electricity supply.

To ensure cleanliness of the environment and develop the consciousness of the citizenry on the maintenance of sound environmental habits, Mr. Umanah said the Exco has approved a statewide environmental sanitation exercise for August 29, 2015, from 7.00 am to 10.00 am. Sanitation exercises, he hinted would be authorised from time to time.

The Governor-in-Council, according to the Commissioner directed the Ministry of Special Duties to ensure daily sanitation and environmental cleanliness within and around the Ibom International Airport, being a major gateway to the State.

The Information Boss also disclosed that the Ministry of Health was directed to review the healthcare laws in the State, with a view to bringing them to acceptable global standards. This, he said, was necessitated by a report on the gaps in the healthcare delivery system in the State.

Also, according to the Commissioner, the Ministry of Environment was directed by Council, to formulate grading standards for billboard structures across the State. The formulated standards, he said would enhance aesthetics, according to the grades each road falls within.

The Commissioner said, as part of his contributions to the Executive Council meeting, he provided information on the recent selection of Executive Council for the College of Commissioners, where the Commissioner for Investment, Commerce and Industry, Emmanuel Enoidem emerged Dean. He said Enoidem, who pledged the loyalty and commitment of the executive Council members, thanked the governor for the opportunity given to them to serve the state.

The Kwara State governor, Alhaji Abdulfatah Ahmed, has directed all the state-owned tertiary institutions to open single treasury accounts for fees and other payments.

He also directed them to close all other revenue accounts maintained in commercial banks across the state.

The directive, the governor said, is a pilot exercise that will actually extend to all revenue generating agencies in the state.

Ahmed, who spoke at a meeting with heads of tertiary institutions and banks in the state, said the directive is to enable the government get a clear picture of the institution's finances as a prelude to the debut of the newly established state's Internal Revenue Service (KSIRS).

The governor said the new directive also bars the institutions from receiving fees and other revenues in cash or maintaining any other bank accounts other than those approved by the state's accountant-general.

According to him, the move was designed to ensure efficiency in revenue collection and disbursement. The governor assured that all institutions will continue to receive budgeted funds from the state government as at when due and stressed that the government's only desire was to ensure efficiency in revenue generation and management.

He identified enhanced internally generated revenue as the only way through which the state can survive the current economic crisis in the country, adding that even if the federal government stops crude oil theft, federal allocations are unlikely to return to previous levels as the sustained drop in global oil prices is likely to continue.

The governor added that Heads of tertiary institutions in the state have an opportunity to demonstrate their managerial skills as they migrate from inefficiency in revenue generation to levels of sufficiency, adding that all ministries, departments and agencies are also barred from opening bank accounts or obtaining bank loans without authorisation from the office of the Accountant-General. Ahmed called on banks to key into the government's new revenue drive and avoid any actions capable of contravening the new revenue law, saying the government will not hesitate to review its relationship with any commercial banks that attempts to sabotage the law.

International dimension of TSA

It is globally recommended that no other government agency should operate bank accounts outside the oversight of the treasury. Institutional structures and transaction processing arrangements determine how a TSA is accessed and operated.

The treasury, as the chief financial agent of the government, should manage the government's cash (and debt) positions to ensure that sufficient funds are available to meet financial obligations, idle cash is efficiently invested, and debt is optimally issued according to the appropriate statutes. In some cases, debt management including issuance of debt is done by a Debt Management Office (DMO).

The TSA should have comprehensive coverage, i.e., it should ideally include cash balances of all government entities, both budgetary and extra-budgetary, to ensure full consolidation of government's cash resources.

The TSA coverage should be comprehensive by including all government-funded entities, including the autonomous and statutory government bodies as well as extra-budgetary funds (EBFs) and special accounts. This is to ensure that the TSA covers, as far as possible, all relevant cash resources of the government. All cash flows related to government revenue, expenditure, donor financing, debt issuance and amortization (including those associated with external debt) should be fully integrated into the TSA system.

However, if a public corporation is discharging a government function, it should be designated as a government unit (in line with the definition in the GFSM 2001) and its activities and resources should be integrated with the budget and TSA, respectively. The International Monetary Fund (IMF) believes that government's banking arrangements are an important factor in managing and controlling its cash resources.

The IMF believes that these banking arrangements are critical for ensuring that all tax and non-tax revenues are collected and payments are made correctly in a timely manner. Besides, the IMF believes that government cash balances are optimally managed to reduce borrowing costs (or to maximise returns on surplus cash).

To achieve all these, it is recommended by the monetary fund that a transparent government will establish a unified structure of government bank accounts via a Treasury Single Account (TSA) system.

Argument against TSA

Speaking with a cross-section of experts, they said the TSA policy may not serve the intended purpose which is to unify the government accounting system to ensure transparency if the remaining 'supper' MDAs cannot be made to comply.

Raising a poser, Mr. Abdulwaheed Usman, a policy analyst asked: "How do we explain for instance, why the head of a big earning MDA in the maritime sector recently appealed to the federal government at the launch of one of its projects, that it should be exempted from remitting revenue to the government because it is embarking on big projects? The federal government must be wary of waivers in implementation of the TSA that could be exploited as a conduit for embezzlement of public funds.

"But how much money does the federal government expects to save by keeping all MDA's earnings with the CBN? We doubt that it would be that much compared to the huge revenue it needs to bridge the huge deficit in the 2015 and 2016 federal budgets." The federal government, Usman said, "Should look beyond the TSA policy and ensure that the targets for non-oil revenue in the 2015 and subsequent budgets like custom duties, and taxes from the Federal Inland Revenue Service (FIRS) are met and possibly exceeded. All traces of corruption in the system must be identified and eliminated."

Besides, the federal government must decisively combat oil theft and pipeline vandalism both of which accounts for the loss of $7 billion revenue and brace up for a further crash in the international price of crude oil. The nation's huge prospects in agriculture, solid minerals and tourism should also be adequately explored to boost the nation's income on a sustainable basis giving the fall in the value of the Naira and the threat to global financial stability occasioned by the devaluation of the Chinese Yuan.

Downside of policy

Laudable as the TSA policy seems, not a few believe that it has its downsides.

To operators in the banking sector, it is feared that the sector would be losing about N2 trillion deposits to the CBN, with the implementation of the Treasury Single

The report on accounts of banks with CBN shows that as at beginning of this current quarter, banks' total public sector deposits was N1.3 trillion but additional net flows from Federation Accounts Allocation Committee, FACC, as at end of last month (about N240 billion) as well as expected inflows by end of this month may push the figure close to N2.2 trillion by the time the pull out begins next month.

Bankers had pressurised the former government of Goodluck Jonathan, which had initiated the policy in December 2014, to soft pedal on the implementation which was originally scheduled for February 2015, on the reasons of a likely negative impact on the economy.

Bank treasurers had confided in The Nation at the weekend that the implementation would adversely affect liquidity in the banking system and end up putting pressure on interest rates and availability of credit to the economy.

In a statement issued at the weekend, Afrinvest Group, a Lagos-based financial investment house, said: "Whilst the directive issued came as the first official statement by the Presidency on the TSA, the Nigerian National Petroleum Corporation, NNPC, had earlier began withdrawing its funds from banks for retirement into CBN.

"This had an impact on liquidity level in the banking system, resulting in a surge in money market rates during the period as banks scrambled for funds to cover their liquidity positions.

"With the TSA implementation now extended to all federal MDAs, the Nigerian banking industry, on an aggregate basis, would be affected in terms of deposits and funding cost structure."

In a related development, FBN Capital, an investment arm of First Bank of Nigeria Plc, stated in its money market reports last weekend that the NNPC withdrew about N400 billion from the banks last month pushing Open Buy Back (OBB), and overnight interest rates to a record high of 50 per cent. It, however, stated that this pressure was corrected when FACC inflow came to the banks within the same period.

In the implementation of the TSA there will be no FACC inflow to correct or compensate for the outflows.

Blessed assurance

The Accountant General of the Federation, Alhaji Ahmed Idris has assured that the introduction of the TSA is not a punitive measure aimed at any government establishment.

Idris made this clarification in Abuja whilst receiving members of the Committee of Vice Chancellors of Federal Universities who were at Treasury House to discuss issues bothering the operations of the varsities.

According to the Accountant General of the Federation, "the introduction of the TSA is not a punitive measure targeted at any government establishment or an attempt to jeopardise the peace and stability of the university system, but part of the reforms being introduced by this administration to institutionalise a more effective and transparent management of public finances in the country."

The TSA, he maintained, is aimed at creating a single pool where all government's receipts are kept in one account, thus making it possible at a glance to know the state of all the accounts.

To ensure a hitch-free implementation of the TSA, Idris revealed that the Office of the Accountant General (OAGF) has set up a special committee to be headed by a director, to address all issues or enquires from all affected MDAs.

He reassured the Committee of Vice Chancellors that Office of the Accountant General of the Federation will collaborate with the universities to ensure that all matters raised will be passionately addressed to ensure that the varsities are more efficient and transparently managed.

Idris allayed fears being expressed by some agencies of government that the recent directive of President Buhari on the establishment and operation of the Treasury Single Account (TSA) for the collection of government receipts for all the MDAs, will negatively affect the operations of some specialised agencies, saying that "it will rather improve their efficiency and increase the rating of the nation's economy."