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TSA proceeds may reduce deficit financing – Adeosun

By on February 10, 2016

Funds transferred to the Treasury Single Account (TSA) domiciled with the Central Bank of Nigeria (CBN) may reduce the level of borrowings to fund the gap in the 2016 budget, Minister of Finance, Mrs. Kemi Adeosun, has stated.

Adeosun, who presented a keynote address at a one-day TSA workshop for state accountants-general in Abuja monday, said fund recoveries as a result of the implementation of TSA may reduce the amount to be borrowed.

Speaking on the benefits derivable from the full implementation of the TSA scheme by the federal government, she said it had provided, for the first time, clarity on government funds at any point in time.

“The balance, which changes daily as MDAs remit revenues and make payments, according to the latest report from CBN, exceeds N2.2 trillion.

“I can report that work is now ongoing within the treasury to determine how much of these funds can potentially be utilised to part-finance the 2016 budget and how much relates to pending commitments. This, of course, will reduce the amount to be borrowed.

“The TSA has provided us with financial information on the revenues of agencies funded by government and has reduced revenue suppression.

“This information is being used to drive our programme to enforce compliance with the Fiscal Responsibility Act and ensure that revenue generating agencies generate expected surpluses and remit to the federal purse.

“The TSA has eliminated opportunities for brokerage and other corrupt practices that previously encouraged agencies to accumulate funds with commercial banks rather than apply them to their intended uses.

“We believe that this will reduce payment delays to contractors, minimise late payment penalties and will consequently improve project completion times and service delivery,” she added.

The minister also disclosed that the TSA had corrected the practice of government borrowing short-term funds at high rates of interest, while simultaneously having idle funds in various bank accounts, adding that by reducing the number of accounts in operation, monitoring and control had significantly improved.

The global economic challenges, which are affecting the nation, the minister stated, demand optimum efficiency in the management of public funds, stressing that these objectives require 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.

“Much has been reported and debated about the merits of the TSA and the impact on the financial autonomy of the various arms of government and on the profitability of commercial banks.

“In practice, the 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,” Adeosun noted.

The minister urged the workshop participants to also discuss and brainstorm on ways and means of improving the revenue base of the country through the full implementation of the TSA, blocking of all leakages, and improving the efficiency of revenue administration.

The nation’s revenue base, she pointed out, was still low while its administration still leaves room for improvement, stressing: “This is bedevilled with a range of problems such as poor computerisation, lack of skilled and dedicated employees, corruption, lack of awareness, and of course unpatriotic conduct by some of the operators.

“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.

“Therefore, I commend the efforts of the OAGF (Office of the Accountant General of the Federation) and organisers for hosting this very important workshop aimed at sensitising the states’ accountants-general on the need to key into the Treasury Single Account scheme of the federal government.

“As professionals in charge of public financial management of your respective states, the ball is in your court and l hope you will take advantage of this workshop to clarify issues that have agitated your minds regarding the implementation of the TSA.
“The TSA will no doubt enable you to block all financial leakages and conserve more funds needed for development in your various states.”

Adeosun said she was aware that some states were already implementing the TSA, and urged them to kindly share their experiences with others so as to encourage those yet to decide to take their first step in this direction.

“At the federal level, I can assure you that our experience has been worthwhile. The TSA has provided complete and timely information on government cash resources, improved operational control on budget execution, enabled efficient cash management, reduced bank fees and transaction costs, facilitated efficient payment mechanisms, and it has also reduced the FGN ways and means requirement to bridge the budget funding gap,” the minister said.

Meanwhile, the executive arm of government and the National Assembly will soon begin discussions on the revenue framework of the 2016 budget, particularly with respect to reviewing the $38 per barrel oil benchmark in the face of falling oil prices.

A senator, who is a member of the Senate Committee on Appropriation, told THISDAY that with oil prices currently below the budget benchmark, a proposal would be made to the executive arm of government on the feasibility of the oil benchmark price.

According to the senator, who preferred not to be named, the discussions with the Ministries of Budget and National Planning and Finance on the budget parameters would help both sides arrive at a revenue framework that is more realistic.

He said with oil hovering at $30 a barrel, the government’s expectation from oil earnings is already $8 short of the budget benchmark.
“So if there is no revision of the revenue framework, the federal government would either have to borrow more to plug the budget deficit and allow the deficit to widen,” he explained.

Similarly, a member of the House Committee on Appropriation who also spoke with THISDAY on the phone last night, admitted that the National Assembly might review the oil benchmark in the 2016 budget.

However, he said this would take place after the various committees had concluded the ongoing budget defence with the various ministries, departments and agencies (MDAs) of the government.

According to him, “Once the committees have concluded the budget defence exercise and submitted their reports to our committee, we shall look at their proposals, following which the National Assembly will enter into the final lap of engagement with the Ministries of Budget and Finance on areas that could be tweaked in the 2016 budget.”

He noted that in reviewing the oil benchmark, the intention of the National Assembly is to ensure that the budget deficit is kept within the range of N2.2 trillion or 2.16 per cent of GDP.

Although many analysts had described the budget as difficult to implement, the Minister of Budget and National Planning, Senator Udoma Udo Udoma, last week allayed fears on the workability of the budget.

In the budget proposal, the deficit will be financed by a combination of domestic borrowings of N984 billion, and foreign borrowings of N900 billion totalling N1.84 trillion.