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Banks jittery over single account as Buhari takes over

By on May 17, 2015

Nigerian lenders are jittery over the pending enforcement of the Treasury Single Account (TSA) of government by the incoming Buhari administration, BusinessDay interactions with operators have shown.

The fear stems from the fact that the implementation of this model, in addition to the tight monetary stance of the Central Bank of Nigeria (CBN), would put a big 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, Africa’s largest economy, 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 N60billion funds belonging to Ministries, Departments and Agencies (MDAs) currently in the vaults of banks.

But the much touted stern stance of Buhari’s administration on corruption is sending jitters through the lender community, as they fear that its implementation may be on the prority agenda of government.

The argument is reinforced by the transparency that the implelemtation would bring to bear on Buhari’s 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.

Chibuke Uche, member of the Monetary Poliocy Committee (MPC) in his recent 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 had failed to enforce the policy which would have compelled MDAs to transfer the multi-billion internally generated revenue into the Treasury Single Account despite the directive by Jonah Otunla, Accountant-General of the Federation, that all such monies be paid through electronic channels called e-Collection, directly to the Consolidated Revenue Fund at the CBN, through a process called the e-Collection. The deadline expired since February.

Efforts by the government through the CBN and Federal Ministry of Finance by engaging chief executives of MDAs and banks on the need for adherance to the policy failed, as the alliance between both parties was so strong that government could not make a headway.

Informed industry sources say that chief executives of some of the high revenue yielding government establishments are frustrating government’s moves towards single accounts because of their pecuniary interest from such deposits.

Some banks, including, tier one lenders, are said to be acting in similar vein because this channel provides them cheap funds through the mopping up of dollars and speculating, 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.

Explaining why the DMBs find it difficult to release the funds, Friday Ameh, an analyst, argued that the trapped government revenues are being round-tripped to purchase Forex and Treasury Bills.

“Why would government for instance go to banks to borrow money through Treasury Bills, when billions of its revenues are trapped in various accounts run by the agencies.”

Ngozi Okonjo-Iweala, Co-ordinating Minister for the Economy and Finance Minister, who frowned at the development, said last year that the “objective of this conspiracy against the national interest is to keep government’s money in the accounts, earning interests for individuals at the expense of Federal Government and the Nigerian people.”

One banker however says, “I think the game may be up for us now.”

 

 

[Business Day]