Update Seminar

Introduction

Several policies and strategies have been put in place by previous administrations on how to

ensure effective and efficient Management of Public Finances in Nigeria but to no avail, part of

which is the introduction of Treasury Single Account (TSA) which if well implemented is

believed to serve as a panacea of mismanagement of Public funds. The TSA formally became

operational on 2nd April, 2012 following the go-live of Government Integrated Financial

Management Information System (GIFMIS). Against the foregoing background has emerged the

leadership of President Buhari with a widely acknowledged distinctive leadership character,

integrity and zero tolerance for corruption, along with an observable disposition towards an ethos

of putting the interest of the collective over and above that of the individual. Infact, he has

defined corruption as the greatest form of human rights violation and just within the short span of

three months, his body language has produced positive results (Odekunle, 2015). It is also with

this spirit that directives were given to all ministries, departments and agencies on total

compliance to the treasury single account that was hitherto introduced by the last administration

but with little or no compliance. Given the magnitude of corruption that had bedeviled Nigeria’s

development, it is the contention and objective of this paper to examine the single treasury

account as a tool for managing Public Finances in Nigeria.

On Sunday, August 9, 2015 President Muhammadu Buhari directed all the Ministries,

Departments and Agencies (MDAs) to close all their accounts domiciled in the commercial

banks and transfer them to the federation account and gave September 15, 2015 as deadline for

total compliance. The Independent Revenue e-Collection Scheme is implemented under Treasury

Single Account (TSA) initiative, which requires that government revenue collection, is put into a

single account for proper cash management.

CONCEPTUAL FRAMEWORK

Treasury Single Account (TSA)

TSA is a unified structure of bank accounts enabling consolidation and optimal utilization of

government’s cash resources.

It is a bank account or a set of linked bank accounts through which government transacts all its

receipts and payments and gets consolidated view of its cash position at any given time (Kifasi,

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2015). Onyekpere (2015) opined that TSA is a process and tool for effective management of

government’s finances, banking and cash position. In accordance with the name, it pools and

unifies all government accounts through a single treasury account. Chukwu (2015) defined a

treasury single account (TSA) as a network of subsidiary accounts all linked to a main account

such that, transactions are effected in the subsidiary accounts but closing balances on these

subsidiary accounts are transferred to the main account, at the end of each business day.

Public Financial Management

It encompasses all the activities involved in resource generation, resource allocation and

expenditure management in government in order to achieve efficient and effective delivery of

public goods and services. These activities include budgeting, financial controls, accounting,

financial reporting, internal and external auditing and actions taken on audited accounts.Ola and Offiong (2008), define public financial management as “the measures put in place to

control people’s money or funds.” You will note that the word ‘public’ means the people while

‘finance’ connotes funds or money. The management of public funds is known as public

financial management. Ekpung (2001), also defines public financial management as the

management of the flow of money or financial resources through an organization (public),

whether it is a company, a school, a bank, or a government agency. The actual flow of money or

financial resources as well as claims against money in a judicious way is its concern. Public

financial management is a specialised, functional area found under the general classification,

public administration and finance.

How does it operate?

In order to maintain the autonomy of MDAs in annual budget execution, a centralized TSA

domiciled at the Central Bank of Nigeria with decentralized transactions processing system was

approved in 2011. There is flexibility for sub-accounts to be maintained if considered absolutely

necessary but must be linked to the TSA. Consequently, the Consolidated Revenue Fund

Account is designated as the Main TSA. By this arrangement, all revenues and expenditure of

MDAs are captured and balances (cash position) discernible from a central point. In terms of

coverage, all MDAs whether fully or partially funded by government; extra budgetary funds,

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donor funds and trust funds are required to be in the TSA net. By this arrangement, public sector

funds will be fully maintained with the Central Bank of Nigeria.

In order to provide a detailed modus operandi of the policy, the AGF issued Operational

Guidelines vide a Treasury Circular “Guidelines on the Implementation of Treasury Single

Account (TSA)/e-Collection” dated 23rd October 2015 that broadly categorized MDAs into

eight (8) for operational reasons as in Table III below.

Table III: MDA Categorization and Implementation Strategy

S/N MDA Category Examples Implementation

Strategy

1 MDAs fully funded

through the

National Budget

All Ministries, relevant

Departments and Agencies

All receipts to go to the

CRF/TSA and

expenditure drawn from

same based on Annual

budget.

2 MDAs not funded through

the

National Budget but

generate

Additional revenues

Teaching Hospitals, Medical

Centers, Federal Universities,

Polytechnics, Colleges of

Education, etc

All Collections from

these Agencies to be

paid directly into the

CRF/TSA, except for

extra budgetary

receipts which are

to be paid into Sub-

Accounts at CBN,

which are linked to

TSA

ii. Platform is configured

to allow access to

funds based on

approved

budget

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3 MDAs not funded

through the Federal

Budget but expected

to pay operating

surplus of 25% of

Gross Earnings to the

CRF.

CBN, SEC, CAC, NPA,

NCC, FAAN, NCAA,

NIMASA, NDIC, NSC etc.

i. All Collection from


paid into Sub‐Accounts

at CBN, which are

linked to TSA

ii. Platform will be

configured to allow

access to funds in the

Sub Account(s) based

on approved budget

4 MDAs funded from the

Federation Account

NNPC, FIRS, NCS, MMSD,

DPR

i. All Federation

revenues generated by


paid into the

Federation Account at

CBN

ii. All Independent

Revenue generated by


paid into CRF/TSA

iii. FGN Share of

Federation Account to

be paid into CRF/TSA

iv . Statutorily approved

cost of collection to be

deducted from

Federation Account and

paid into Sub-Accounts

at CBN which are

linked to TSA

v. Platform will be

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configured to allow



on approved budget

5 Agencies funded

through the Special

Accounts (Levies)

NSC, RMRDC, PTDF,

NITDA, etc.

i. Sub-Accounts linked

to TSA to be

maintained at CBN.

ii. All IGR collected to

be paid directly into

the CRF/TSA

iii. Platform will be

configured to allow



on approved budget

6 Profit oriented Public

Corporations/Business

Enterprises

BOI, NEXIM, BOA,

Transcorp Hilton, etc.

i. Sub-Accounts linked

to TSA to be

maintained at CBN.

ii. Platform will be

configured to allow


Sub Accounts(s)

based on approved

budget

iii. Dividends from

these agencies to be

paid into the CRF/TSA

7 Revenue Generated

under Public Private

Partnership.

All Incomes from PPP

arrangement e.g. Production

of International Passports,

Seaport, Concession

i. TSA Sub-Accounts to

be maintained at CBN

ii. FG portion of the

collection to be paid

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Arrangement etc into CRF/TSA.

iii. Partners portion of

the revenue to be

transferred to the

partners Account

8 MDAs with Revolving

Funds and Project

Accounts Drug Revolving

Funds, (Teaching Hospitals,

Universities) Fertilizer

Revolving Fund, Roll‐Back

Malaria, SURE-‐P, etc.

i. Project Account

(Revolving Funds) to

maintained at CBN

ii. Collection (IGR) from


paid to CRF/TSA

iii. Platform will be

configured to allow


Sub Account(s)

Source: Guidelines on the Implementation of TSA/e-Collection

WHY TSA?

Until the introduction of the TSA, the country faces numerous challenges with management of

Public Finances that affect government efficiency and effectiveness in service delivery,

transparency and accountability. Some of these challenges were:

i. Loss of control on the number of bank accounts. MDAs are required under FR 701 to get the

approval of the Accountant-General of the Federation (AGF) for all their banking relationship. In

addition, each MDA is required by regulation to maintain four bank accounts, one each for

revenue, personnel costs, overhead costs and capital.

However, many MDAs failed to comply, hence the number of bank accounts became over

bloated and monitoring the accounts became a herculean task for the OAGF. A survey of the

number of such accounts with both the Central Bank of Nigeria (CBN) and Deposit Money

Banks (DMBs) carried out by the OAGF in 2010 puts the number of accounts at over 10,000!

With such a large number, government could not have timely consolidated information of cash

position necessary for efficient cash management in the country;

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ii. Idle Cash in MDAs’ accounts while the CRF account is perpetually overdrawn. Prior to the

reforms, government financed its personnel and overhead costs monthly in advance while capital

projects were funded quarterly in advance but often the funds remained underutilized for the

periods. This leaves the Consolidated Revenue Fund (CRF) Account from which MDAs

Accounts were funded perpetually overdrawn as Ways and Means Advance granted by CBN in

line with S.38 (2) of their Act.

Accordingly, government incurs cost of borrowing on the overdrawn balance while the DMBs

that are keeping the MDAs’ idle funds do not remunerate them but buy government treasury bills

and bonds to earn interest income. A case of double jeopardy. The level of ways and means

granted by CBN to meet cash flow shortfalls has grown over the years reaching N342 billion in

2014.

iii. Maintenance of several extra budgetary funds. There exist a number of funds (dedicated

accounts) outside the Consolidated Revenue Fund (CRF) with huge balances while government

suffers charges on the CRF overdrawn balance with the CBN. If the extra budgetary funds were

linked to the CRF, it would have eliminated the ways and means charges, as the net position

would have been positive. Besides, the extra budgetary funds would have been an easy source

for short-term borrowing instead of treasury bills/certificates;

iv. Non-remittance of independent revenues by MDAs. A number of MDAs fail to remit their

revenues into the CRF in line with S.80 of the Constitution and spend the funds without

appropriation; etc.

Table II below shows the abysmal performance of independent revenues from 2010-2015.

YEAR REVENUE GENERATION PERFORMANCE (%) VARIANCE (%)

ACTUAL (N bn) BUDGETED (N bn)

2010 73.15 305.97 23.91 76.09

2011 153.55 300.00 51.18 48.82

2012 190.71 228.93 83.3 16.70

2013 208.76 446.78 46.73 53.27

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2014 249.44 455.78 54.73 45.27

2015 298.33 452.04 66.00 34.00

Source: OAGF Fiscal Report (2010 – 2015)

v. Growing domestic debt servicing burden. The insufficiency of funds to run government

services had made government to run budget deficit over the years with domestic borrowing

being a major component for its financing. For example, the sum of N624.22 billion was

borrowed to fund the 2014 budget thereby increasing the domestic debt stock. The implication of

high domestic debt is that huge financial resources that would have been used to deliver goods

and services had to be used for debt servicing annually. In 2014 for instance, the sum of N880.39

billion was spent on debt servicing or 18.75% of the total budget while Capital expenditure was

merely N490.48 billion or 10.45% of the total budget.

TSA AS A TOOL FOR MANAGEMENT OF PUBLIC FINANCES

A great challenge facing most parts of the world and, particularly, the developing countries like

Nigeria is how to achieve efficient allocation of resources as well as stabilization of the business

cycles. 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 minimize the cost of government borrowing and maximize the opportunity cost of

cash resources. This requires cash received is available for carrying out government’s

expenditure programmes and making payments in a timely manner.

Nigeria’s Finance minister reveals that the Treasury Single Account has helped tremendously in

managing public finances within four (4) month of its implementation. The minister who made

the disclosure while fielding questions from National Assembly Joint Committee on

Appropriations alongside Nigeria’s minister of Budget and Planning Udo Udoma, she said the

account had accumulated to N2.9trillion, from its initial N2.2trillion in February.

According to the Accountant General of the Federation (AGF), Mr. Jonah Otunla, the new

Electronic Revenue Collection (ERC) platform is aimed at improving internally generated

revenue in the face of declining oil prices. This, he said, was in line with a series of treasury

reforms, which began in 2012, aimed at ensuring transparency and accountability in the

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management of the nation’s finances. Director, Funds, Office of the Accountant General of the

Federation, Mr. Mohammed Dikwa, who spoke on his behalf, posited that henceforth,

government revenues would now be paid into the CRF/TSA, as it is now difficult for MDAs to

maintain revenues with commercial banks.

Onyekpere (2015) opined that the advantages and benefits of the TSA are legion. The

consolidation into a TSA paves way for the timely capture and payment of all due revenues into

government coffers without the intermediation of multiple banking arrangements. This prevents

revenue leakages in terms of revenue loss and mismanagement by operators of all revenue-

generating agencies. With this comes better cash management practices since the Treasury can at

all times have an overall view of government’s cash position, as against the fragmented positions

of different Ministries, Department and Agencies (MDAs), which need to be laboriously pooled

together to get the overall picture.

However, it has been discovered that, some revenue generating MDAs that generated N3.06

trillion in 2009, but only remitted N46.80 billion to government coffers; generated N3.07 trillion

in 2010 but remitted mere N54.10 billion; and generated N3.17 trillion in 2011 and just remitted

a meager N73.80 billion.

As in the case of Nigerian Communications Commission (NCC), which had two different

audited accounts — one with lower figures sent to the Fiscal Responsibility Commission (FRC)

and another with higher figures sent to the Office of the Auditor General of the Federation

(OAGF). During close examination of the Federal Inland Revenue Services (FIRS) presentation

showing how in its 2009 audited accounts, N5.6 million was found in the audited account

forwarded to FRC while N323 million was found in the same audited account it sent to the

Office of the Auditor General of the Federation.

Advocates of this policy say it will encourage integrity in the management of public funds by

government and her agencies. The immediate past Accountant-General of the Federation, Jonah

Otunla, also backed the implementation of TSA stressing that it would bring about transparency,

efficiently and accountability. This is because TSA is bound to improve transparency and

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accountability in public finance management. First, it will remove that organizational/MDA

secrecy around the management of public finances. The discretionary aspect of accounting

officers and politicians collaborating to do all manner of business with government finances

before executing projects thereby causing delays or negotiating interest rates with banks for

private gains will be over. The second is that revenue generating agencies that have been

depriving the Treasury of due revenue through a plethora of bank accounts under their purview

and which is not known to the authorities will no longer be able to defraud the revenue since all

funds will be swept into the TSA. Thus, beyond transparency and accountability, the TSA will

introduce economy and efficiency into overall management of public finances and this will in the

long run lead to effectiveness of government spending since it places government in a better

position to realize overall policy goals.

The Minister of Finance, Mrs Kemi Adeosun, lists the gains of the Treasury Single Account

(TSA) during a TSA workshop for states Accountants-General in Abuja. Excerpts from her

address:

The global economic challenges which are affecting our nation demand optimum efficiency in

the management of public funds. The objective requires an overhaul of the financial management

approaches adopted to meet financial obligations on time and ensure that cost effective financial

support is provided to public institutions. She added that, TSA is an essential reform for any

government wishing to pursue fiscal sustainability and prudent management of its resources. It

increases accountability and transparency, improves the processing of payments and collections

and reduces borrowing costs.

TSA IMPLEMENTATION IN NIGERIA

The full implementation of the TSA will definitely have a positive effect on the economic

planning of the Federal Government, swift & full budgetary implementation, reduce leakages

and other irregularities in the MDAs, aid appropriate planning & data collection and data

analysis & timely aggregation of Federal Government Revenue etc, despite these avalanche

benefits its implementation has certain implication on the economy as it will pose a serious cash

crunch and liquidity challenges to the banking sector, who prior to the introduction of the TSA

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feed fat on the float created by the duplicated and unaccounted MDAs accounts scattered in all

the Deposit Money Banks (DMBs) in Nigeria. Perhaps this will compel the banks to focus on the

funding of the real sector of the economy, rather than financing heavy Federal Government

projects, Oil & Gas transactions, Forex dealings etc. Any DMBs that fails to adapt swiftly and

look inwards to face the core banking functions which they were license, will definitely no

longer be profitable, which will leads to heavy downsizing of staff and thereby increasing the

unemployment rate in the country.

Some economic analysts are of the opinion that, the liquidity in the banking system will

definitely be affected. This is because once the banks collect government’s funds, it will be sent

directly to the TSA. The free funds some banks used to enjoy will no longer be there,

But on the other hand, some argued the opposite as follows: that they did not the full

implementation of the TSA hurting banks, properly so-called. It will only hurt establishments

that purport and pretend to be banks but have failed, refused and neglected to understand banking

and do what bankers do elsewhere. It is an opportunity for banks to refocus on the original

purposes for which they were set up – to collect depositors’ funds (not necessarily government

funds), keep them safe; engage in intermediation to create wealth and jobs for the economy and

in the process earn profit for themselves. Yes, the idea of sitting idly and expecting rents and

unearned income should be gone and gone for good. Good and well-managed banks will have no

problem with this measure.

CONCLUSION

From the foregoing, it is obvious that the primary objective of a TSA is to ensure effective

aggregate control over government cash balances. It avoids borrowing and paying additional

interest charges to finance the expenditures of some agencies while other agencies keep idle

balances in their bank accounts. There were situations where some MDA’s manage their finances

like independent empire and remit limited revenue to government treasuries. Under a properly

run TSA, this is not possible as agencies of government are meant to spend in line with duly

approved budget provisions. The maintenance of a single account for government will enable the

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Ministry of Finance monitor fund flow as no agency of government is allowed to maintain any

operational bank account outside the oversight of the ministry of finance.

The full implementation of this programme therefore is a critical step towards eradicating

corruption and other financial irregularities ravaging the country.

RECOMMENDATIONS

There is the need to improve the revenue base of the country through full implementation of TSA

so as to blocking of all leakages and improve the efficiency of revenue administration. The

revenue base of the Country is still low and its administration still leaves room for improvement.

This clearly indicates that the underlying assumptions underpinning the 2016 budget may only

be realised with serious efforts put in place towards revenue efficiencies and expenditure

discipline such as implementation of the TSA and Cash Management concepts by all tiers of

government.

The Deposit Money Banks (DMBs) as business entities should look out for opportunities in the

policy that will increase their profitability rather than crying over spilt milk. Some of the

opportunities include, serving as Agent for Taxes and Revenue collection, developing innovative

products to attract depositors; Reaching out to the unbanked segment of the society residing

mostly in the rural areas etc. CBN should pursue more robust monetary policy that ensures the

stability of the financial system. The recent injection of N740bn into the commercial banks and

slashing of Cash Reserve Ratio (CRR) from 31% to 25% are meant to ease liquidity.

Furthermore, total commitment and sincerity of purpose are required of those who are to

implement this policy. The agencies of government that are affected by the measure are thus

enjoined to ensure that it succeeds. They must subsume their personal interests under the greater

need of the country. Altogether, what Nigeria requires at this time is the political will to push this

reform measure through. I suggest that all stakeholders play the roles expected of them to ensure

a successful implementation of the new policy.

REFERENCES

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Chukwu, J. August 16, 2015: Treasury ingle Account: Giving Life to Jonathan’s Dead policy Directives.Guardian Newspapers. Retrieved from: http://www.ngrguardiannews.com/2015/08/treasurysingleaccount-giving-life-to-jonathan’sdead-policy-directives/

Ekpung, E. (2001). The Essentials of Public Finance and Public Financial Management in Nigeria. Calabar: University of Calabar Press

Enweagbara, O. August 16, 2015: Implementing the Treasury Single Account. Punch Newspapers. Retrieved from http://www.punchng.com/opinion/implementing-the- treasury-single-account/

Federal Treasury Circular, Ref no. TRY A9 & B9/2015: Guidelines on the Implementation of Treasury Single Account (TSA)/e-Collection.

Federal Treasury Circular, Ref no. TRY A6 & B6/2004: Guidelines for Processing theCentral Capital Account (CCA) in the CBN.

Federal Treasury Circular, Ref No. TRY A8 & B8/2008: Circular for the Implementation ofe-Payment form for all Funds of the Federal Government of Nigeria.

Femi A. (Feb. 20, 2016) How TSA is curbing corruption Vanguard Newspaper retrieved from: http://www.vanguardngr.com/2016/02/how-tsa-is-curbing-corruption-adeosun-finance-minister/how-tsa-is-curbing-corruption-adeosun-finance-minister/

Iroegbu,C (2015),”Treasury Single Account ‘ll block leakages’, Vanguard, August 24, P38

Mathias Okwe, Abuja. Chijioke Nelson, Temiloluwa Adeoye, David Ogah(2015), Treasury Single Account: Giving Life to Jonathan’s ‘Dead’ Policy Directives’, Sunday Guardian, August 16, p52-58

Odekunle, F. (2015). Tackling Corruption in Nigeria: Strategic and Operational Options for the Buhari Administration. Being a paper delivered at the 5th Convocation Lecture of Al-Hikmah University, Ilorin on Saturday, 12th September, 2015.

Office of the Head of Service of the Federation Circular, HCSF/428/S.1/120, 7th August 2015. Re: Introduction of Treasury Single Account (TSA) (e-Collection of Government Receipts),

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http://www.vanguardngr.com/2016/02/how-tsa-is-curbing-corruption-adeosun-finance-minister/how-tsa-is-curbing-corruption-adeosun-finance-minister/

http://www.vanguardngr.com/2016/02/how-tsa-is-curbing-corruption-adeosun-finance-minister/how-tsa-is-curbing-corruption-adeosun-finance-minister/

http://www.punchng.com/opinion/implementing-the-%20treasury-single-account/

http://www.punchng.com/opinion/implementing-the-%20treasury-single-account/

http://www.ngrguardiannews.com/2015/08/treasurysingleaccount-giving-life-to-jonathan'sdead-policy-directives/

http://www.ngrguardiannews.com/2015/08/treasurysingleaccount-giving-life-to-jonathan'sdead-policy-directives/

Update Seminar

Documents

Transcript of Update Seminar