Commercial Banks in Nigeria were, yesterday, busy with the transfer of an estimated N1.2 trillion of public sector funds to the Central Bank of Nigeria in compliance with the Federal Government directive on Treasury Single Account, TSA.
As the deadline for the implementation of the Treasury Single Account for MDAs closed, yesterday, Nigerian banks were sorting out accounts of MDAs the CBN circulated among banks to identify which of the accounts was domiciled in their banks.
As a result, there was no trading between banks on the inter-bank money market yesterday as they were engaged on how to comply with the directive to transfer government revenues into a single account with the Central Bank.
President Muhammadu Buhari had ordered that all revenues be paid into the “Treasury Single Account” (TSA) from yesterday, as part of a drive to fight corruption and aid transparency. “No trading is currently going on because no bank was willing to put out quotes until there is a clearer direction with the implementation of the Treasury Single Account,” one dealer said.
“The market is frozen right now, as no trading is going on,” a bank treasurer said.
Analysts have predicted that implementation of the government policy will drain liquidity from the banking system, potentially putting some banks in a dire situation.
The overnight lending rate closed at five per cent on Monday, but dealers said the rate was initially quoted at 200 per cent yesterday. No deals were done using that rate.
About 1.2 trillion Naira, or 10 per cent of banking sector deposits, is expected to be transferred to the government account with the Central Bank in the course of implementing the TSA policy.
An official of Guaranty Trust Bank, who did not want his name in print, said that the CBN gave banks a very long list of accounts of MDAs in banks. Each bank was told to identify the accounts domiciled in their bank and remit the funds to the CBN. He said that the list was very long, showing that the CBN did its home work. He said that banks have no option but to comply with the directive, saying that the policy will further squeeze the already tight liquidity situation in the economy.
He, however, said that if government fulfills its obligation by paying contractors its debt, part of the money will return to the banking system.
Data from the CBN indicate that as at end of June, 2015 total deposits (demand, time and savings) in the financial system was N13.5 trillion. Analysis of this shows that the private sector accounts for 90.7 per cent (N12.2trillion) of total deposits, while public sector funds accounts for 9.3 per cent (N1.3trillion) which will be lost to TSA.
In a circular with reference No BSD/DIR/GEN/LAB/08/048, dated September 7, 2015, entitled: “Deadline for transfer of Federal Government funds to Treasury Single Account,” signed by Mrs. Tokunbo Martins, CBN Director of Banking Supervision, the CBN warned that it would “impose severe sanctions on any bank that fails to comply on or before the deadline of September 15, 2015.”
President Muhammadu Buhari had on Monday set a deadline of September 15 for MDAs to commence the use of the approved government bank accounts for payments as part of efforts to ensure transparency and stamp out corruption, following observations that some officials were foot-dragging.
Femi Adesina, the President’s spokesman, had explained that all receipts due to the government or its agencies must be paid into the TSA maintained by the CBN and linked to other government bank accounts, before the deadline.
As the deadline for compliance with the Treasury Single Account for Ministries, Departments and Agencies (MDAs) ended yesterday, some members of the National Assembly have lauded President Muhammadu Buhari for introducing it.
The lawmakers told the News Agency of Nigeria (NAN) that full compliance with the directive would help in blocking leakages and ensure transparency.
Sen. Ali Wakili, (APC-Bauchi), who commended President Buhari for the directive, said the implementation of a TSA was backed by law.
Wakili said the development would enable banks, which hitherto relied majorly on MDAs, to become more resourceful. According to him, fragmented banking has before now affected government’s ability to undergo successful cash planning and management.
Sen. La’ah Danjuma (PDP-Kaduna) said that the implementation of the policy would go a long way in revamping the economy. He expressed optimism that the move would yield positive result in the long run.
“It is time for Nigerians to support all policies of government aimed at improving the economy. There is no doubt that the TSA would have an immediate impact on banks but the long-term effect will be beneficial, so I support it,” he said.
The Treasury Single Account is a unified structure of government bank accounts that allows consolidation and best use of government cash resources.
Section 80 (1) of the 1999 Constitution as amended makes provision for implementation of TSA.
It states: “All revenues, or other monies raised or received by the Federation shall be paid into and form one Consolidated Revenue Fund of the Federation.”
