Govt counts gains as TSA hits N7tr
The impact of the Treasury Single Account (TSA) depends on who is telling the story. For the government, the TSA has remained a masterstroke against corruption and misapplication of public funds. But for commercial banks, which hitherto relied on public funds to post huge profits, the policy has been a nightmare. The nearly two years’ gains of full implementation of the TSA became feasible after SystemSpecs deployed Remita, a local technology software, to drive the project. So far, over N7 trillion has entered the government coffers, giving the country more control of its earnings, writes COLLINS NWEZE.
It has been almost two years since the Federal Government began full implementation of the Treasury Single Account (TSA).
The feedback shows that it is one of the best economic decisions ever taken by the government to ensure accountability and transparency in the management of public funds.
Besides, it is believed that central to the growth of every economy is proper management of funds and transparency, especially on the part of the government.
Before the coming of TSA in September 2015, Nigeria’s notoriety in the management of public funds brought the country to the state of near-economic-collapse. The TSA has so far proven to be the most significant achievement of the current administration.
The backbone of the functionality of TSA in Nigeria is Remita, an e-payment solution adopted by the Central Bank of Nigeria (CBN) for the collection and payment of funds for the Federal Government, and used by all commercial banks and over 500 microfinance banks. Remita is aimed at revolutionising the e-payment industry and its developer, SystemSpecs, has been described as the unsung hero of Nigeria’s financial reform.
The TSA has been able to consolidate all inflows from government agencies using a single account-Consolidated Revenue Account (CRA) at the CBN. The effectiveness of the TSA since its introduction about two years ago has proven that a level of sanity can be achieved in the use of public funds.
Analysts believe that the TSA has helped the Buhari administration’s anti-corruption fight by flushing out ghost workers and saving the economy from imminent collapse.
“Remita processes over $30 billion worth of transactions every year, and that’s just within Nigeria,” SystemSpecs’ Executive Director Deremi Atanda said at the yearly Gulf International Technology Exhibition (GITEX) in Dubai, United Arab Emirate (UAE).
He continued: “There’s also a roadmap to take Remita to Africa. So, if you have a vision to be part of revolutionising payments in Africa at whatever level, driving financial inclusion at the national level, savings, micro-savings and micro-transactions, Remita is best placed to help you achieve that.”
An English newspaper, The Economist, says: “TSA may be the biggest coup of all. It replaced a labyrinth of government piggy banks, giving Nigeria more control of its earnings.”
Launched in 2006, Remita is an electronic platform that helps the government, corporate organisations, Small and Medium Enterprises (SMEs) and individuals to make and receive payments without stress. It aggregates multiple bank accounts, giving customers the ability to perform complete e-Transactions.
About two years after its implementation kicked off, the policy has shored up the government’s earnings by N7 trillion by the end of Marc. The TSA is a bank account or a set of linked bank accounts through which the government transacts all its receipts and payments and gets consolidated view of its financial status at any given time.
The TSA policy – initiated by former President Goodluck Jonathan administration but implemented by his successor, the Buhari’s administration – stipulates that all government taxes, levies and tariffs should be deposited with the CBN.
The funds would subsequently be disbursed to MDAs based on approved rules to ensure accountability in the management of government resources. Several attempts to adopt the TSA in the past were unsuccessful. Reason: the CBN lacked the technological-know-how to manage the retail aspect of the policy. An e-technology platform, Real-time gross settlement systems (RTGS), initially expected to drive the payment leg of TSA policy was unsuitable for retail payments.
Also, TSA monthly helps the government to save over N4 billion, previously expended on maintaining numerous accounts across the country.
Prior to this development, every organisation that collects money for the Federal Government stacked cash in Deposit Money Banks (DMBs) where it is left to yield interest over the years for faceless individuals and groups while the government was starved of the funds meant for developmental projects.
However, one major development that has contributed immensely to the robustness and efficiency of TSA is its integration with financial technology (FinTech). FinTech is an economic industry composed of companies that are trying to provide new financial solutions, which was previously the prerogative of banks. These companies are active in various domains, but they have one common attribute, which is: building and implementing technology, which is used to make financial markets and systems more efficient.
TSA boosts FinTech sector
Analysts explained that apart from lowering the level of corruption, TSA exposes the emerging potential of Nigeria’s FinTech Industry. As global competition rises and technology advances, the need to leverage IT for co-creation of value is a major factor for development.
According to reports, FinTech is one of the fastest-growing industries in the world. It has grown into a N22.3 billion industry with a 75 per cent growth rate recorded in 2015. Global investment in FinTech ventures in the first quarter of last year reached $5.3 billion, a 67 percent increase over the same period in 2015, and the percentage of investments going to FinTech firms in Europe and Asia-Pacific nearly doubled to 62 per cent, as reported by Accenture.
In a more recent development, The Bank of England has opened up the UK’s payments systems – the “plumbing”, which facilitates same day money transfers between banks – to organisations that are not banks, giving FinTech startups another step up in their challenge to traditional banks. It’s the latest move by the UK’s financial authorities to foster technology innovation and “level the playing field” between the established institutions and newer ones. Nigeria can hopefully take a cue from this.
The TSA journey has been a remarkable one. However, huge bottlenecks created by self-serving interests still militate against the full implementation of the policy. Despite its huge gains, the government is not treating the policy as a prized national asset that is helping to drive accountability and stock-taking. There are still some pockets of revenue leakages and financial impropriety all around. TSA is not primed to handle forex for now and this is a major excuse for universities requesting for exemption since their grants are mainly in foreign currencies. Although, SystemSpecs Limited has the mandate to provide the technology that can power the forex component of the policy, it has not been granted approval by the government to do this.
For instance, the Management of the National Health Insurance Scheme (NHIS) earlier claimed that TSA stifles the fluidity of funds meant for the healthcare of enrollees, until an in-depth probe revealed underhand payments running into billions of Naira to dubious HMOs which were not remitted to hospitals where enrollees were supposed to get treatment. The list of defaulters is growing and will continue to, except the government takes proactive measures to ensure sundry compliance with its directive for remittance of all public funds into the TSA.
While we must commend the Federal Government for showing some interest in the growth of FinTech with its investment in ICT universities, an ICT development bank and a $1 billion ICT firm, the government should not rest on its oars. Rather, it should improve its sense of ownership of the policy as a home-grown FinTech solution whose gains we can readily count and chart the course for more FinTech investments in Nigeria.
SystemSpecs’s Chief Executive Officer, John Obaro, said the deployment of Remita has reduced the government’s debt servicing costs, lowered liquidity reserve needs and boosted effective use of surplus cash.
Obaro said his firm would continue to deliver on the TSA service terms of contract with the CBN despite being owed its earned fees on e-collections. He disclosed that some bank branches have started to turn down collection of government deposits due to the non-payment of these agreed fees.
Obaro said: “From our end, we have continued to provide and support the Remita platform, 24 hours a day and seven days a week, for use by citizens for all their payments to the Federal Government. Our continued support for the TSA is fuelled by our belief in the enormous benefits the Remita software brings to the implementation of TSA to the average citizen.
“We must admit though that we are excited and further driven by the fact that our indigenous Remita software has succeeded in powering the technological backbone for such a successful and strategic national initiative, along with other well-meaning Nigerians, we do not want this to fail.”
Presenting a paper at a workshop organised in Abuja by the Office of the Accountant-General of the Federation and the World Bank, Prof. Stephen Ocheni said achieving efficient allocation of resources and the stabilisation of the business cycle remained great challenges facing most parts of the world, particularly developing countries, such as Nigeria.
In the paper obtained by The Nation titled: “Treasury Single Account: A catalyst for public financial management in Nigeria”, Ocheni of Public Sector Accounting, Kogi State University, Anyigba, said: “An important factor for efficient management and control of government’s cash resources is a unified structure of government banking.
“Such unified banking arrangements should be designed to minimise the cost of government borrowing and maximise the opportunity cost of cash resources. This requires that cash received is made available for carrying out government’s expenditure programmes and making payments in a timely manner.”
The Buhari administration has initiated and implemented the TSA and other economic policies for better management of national resources and the fight against corruption. Besides the TSA, the government also introduced the Government Integrated Financial Management Information System (GIFMIS), Automated Accounting Transaction Recording and Reporting System (ATRRS), Integrated Payroll and Personnel Information System (IPPIS), International Public Sector Accounting Standard (IPSAS), among others to promote public financial management systems.
The government began TSA implementation with the e-Payment component in April 2012 and its e-collections components followed in January, last year. In September 15, 2015, the government set a deadline for full compliance with the policy by all MDAs.
According to Ocheni, the policy facilitates better fiscal and monetary policy coordination as well as better reconciliation of fiscal and banking data, which in turn improves the quality of fiscal information. The TSA also cuts the debt servicing costs and eradicates financial misappropriation in the public sector.