A report by BusinessDay newspaper indicates that Nigerian lenders are in panic mode at the moment over the pending enforcement of the Treasury Single Account (TSA) of government by the incoming administration.
Their fear is due to the implementation of this model, with also tight monetary stance of the Central Bank of Nigeria (CBN), would put a squeeze on the banks.
“There is the fear of liquidity squeeze due to the likelihood of unification of government accounts by the incoming Buhari administration. The fear is borne out of the fact that with the Monetary Policy Rate at 13%, Cash Reserve Ratio (CRR) at 20% and 75% for private and public sector deposits respectively, its implementation would be tough for banks,” says a senior industry player.
Also, returns of lenders in Nigeria, driven substantially by net interest margins, would further be crimped by the TSA implementation.
This is because the single account, which is supposed to unify and monitor incoming and outgoing government transactions for transparency and accountability, will deny the banks of over N60 billion funds belonging to Ministries, Departments and Agencies (MDAs) currently in the vaults of banks.
But, the publicised stance of Buhari’s administration on corruption is causing panic in the lender community, as there are concerns that its implementation may be on the priority agenda of the incoming government.
The argument is further buttressed by the transparency that the implementation would bring to bear in the incoming government.
“In our opinion, the implementation of a Single Treasury Account (STA) is expected to block revenue leakages within the government parastatals as the Ministry of Finance will be able to monitor the inflows and outflows, hence augment the reduction in oil revenue due to falling oil prices,” says Ayodeji Ebo, analyst with Afrinvest Securities limited.
A member of the Monetary Policy Committee (MPC), Chibuke Uche, in his contribution to deliberations at the meeting, said: “it has indeed become very clear that total economic restructuring is an urgent imperative. Although the falling oil price is making the fiscal space more complicated, I believe that there is still room for improvement.
“One area that can be easily improved upon is the reduction of wastages in government finances, which is as a result of poor financial management. By far the greatest single example of this, is the absence of the Treasury Single Account (TSA)”.
The outgoing government didn't succeed in enforcing the policy which would have compelled MDAs to transfer the multi-billion internally generated revenue into the Treasury Single Account despite the directive by the Accountant-General of the Federation. It is said that all such monies be paid through electronic channels called e-Collection, directly to the Consolidated Revenue Fund at the CBN. The deadline had expired since February, 2015.
Informed industry sources say that leaders of the high revenue yielding government establishments are hindering government’ efforts towards single accounts because of the benefit they make from such deposits.
Some banks are also not happy with the new development because this channel provides them cheap funds through the mopping up of dollars in circulation, thereby putting pressure on the naira, which is now a major challenge for the CBN.
“While the outgoing government has failed in its efforts to help itself in plugging leakages in the system, especially in the face of low oil incomes, the opportunity has provided itself for Buhari to act fast, as soon as he assumes office and save the situation that has degenerated," says an analyst.
“There is no way Buhari’s government will not be hard on the MDAs and banks which have been able to hold government to ransome as they refused to implement a policy that would have engendered confidence and transparency in governenace,” a banker told BusinessDay last night.
Meanwhile, reports say Buhari has concluded plans to dismiss the security groups in charge of oil pipelines and waterways.