On Sustaining the Gains of Treasury Single Account
In the annals of fundamental reforms in Nigeria, few have captured public attention like the Treasury Single Account (TSA). Rarely has a government policy commanded the sort of mass appeal and elevated expectation as the TSA has done. In it, Nigerians invested their hope for a new order in public finance management; and on its shoulders, they placed the burden of defenestrating a profligate past.
This short post takes stock of our TSA journey highlighting key achievements and challenges; and sets agenda for the future.
Treasury Single Account or TSA, for short, is a unified banking arrangement that allows for centralized management of all cash resources. It can be a single bank account or a set of linked bank accounts provided there is central control and oversight. Centralization makes for ease of consolidation of all cash balances and therefore earns TSA its place as a powerful cash management tool. Although TSA can be maintained in one or more commercial bank(s), the Federal Government opted for a Central Bank domiciled TSA. The underlying reasons for this are outside the scope this post.
TSA is built on the principles of the unity of cash and of the treasury. Unity of cash is founded on the fungibility, or exchangeability of cash which means that any cash can be exchanged for another irrespective of purpose. Unity of the treasury means that at each level of government, there can only be one treasury notwithstanding that there may be multiple arms of government.
Leveraging on technology, TSA is being implemented simultaneously with a multi-channel online electronic collection (e-collection) system that sweeps all receipts to relevant accounts at Central Bank of Nigeria (CBN) in real time.
TSA applies to all funds of all entities of the federal government be it proceeds of debt, donations, budgetary allocation, fees, charges, earmarked funds and all other funds for which the entity has primary responsibility for custody of the underlying cash. The consolidation of cash flows from all these sources gives government a clear picture of its cash position and increases liquidity.
Fragmented banking arrangement is costly. It leaves significant cash assets of government out of treasury oversight and control. Government borrowing is done in complete ignorance of actual government cash position leading to borrowing and incurring interest when there was no need to borrow in the first place. Excess cash balances that should ordinarily be invested to earn interest are left idle because the Treasury is unaware of their existence. This, in a nutshell, is the underlying rationale for TSA: effective cash management.
The implementation of TSA has brought immense, tangible, measurable and verifiable benefits. First on the list is huge savings on interest charges. As at the last count, TSA saves government over N42 billion monthly on Ways and Means charges. Ways and Means is overdraft facility that the Central Bank is statutorily mandated to extend to government to bridge temporary cash short falls. Second, TSA has improved government liquidity position. Consolidation of government cash balances under the control and oversight of the Treasury and implementation of nationwide real time whole-of-government cash collection means that every kobo is immediately paid into government coffers and available for budget implementation. Loss of government money by theft of physical cash whether by man, snake, rat or armed robbers have drastically reduced, if not totally eliminated. Gone were the days when bullion vans conveying government cash were high jacked in transit. On the monetary policy side, the near total withdrawal of federal government cash from commercial banks has reduced both inflationary and exchange rate pressures. These are just a few of the many empirical benefits of implementing TSA over the past three years.
The road to TSA was, expected ly, paved with near-insurmountable challenges from both expected and unexpected quarters and sources. Thanks to the support of Mr. President, the Vice President and the Honourable Minister of Finance, the journey was made easier and the road smoother. For ease of discussion, these challenges are grouped into three: institutional, operational and technological.
Institutional challenges relate to those arising from inter-agency relations, conflicts in agency mandates as well as dysfunctions arising from how participating agencies interpret their roles. Stakeholders in the TSA project have different understanding of their roles; and have acted, sometimes, in manners that undermine rather than promote the cause of the policy. This is the reason parties to a project of the scale and magnitude of the TSA operate under a well-documented Memorandum of Understanding or Service Level Agreement that not only spell out responsibilities of parties but also sets out the boundaries within which each party performs its roles.
Institutional challenges also manifest in the form of wrong assumptions about the scope of the TSA and to what extent the Treasury can exercise control over the financial operations of government entities and whether specific agencies given their legal status and mode of funding are within or outside the scope of the TSA. Although the Presidential directive on TSA communicated through the Head of the Civil Service of the Federation Circular of 7th August, 2015 and the TSA Guidelines approved by the Vice President and issued by the OAGF tried to clear all conceivable doubts about the universal application of the TSA across all arms and MDAs of the Federal Government; these assumptions have defied all efforts to lay them to well-deserved rest.
Operational challenges are those originating from the interaction of institutions and individuals with established TSA processes and procedures. It manifests in the form of wrong interpretation of processes, misapplication of business rules and non-compliance with agreed guidelines. Some of the very common examples of operational challenges are lump sum transfer of MDA balances by Deposit Money Banks (DMBs) which made it difficult for affected entities to access their funds; transfer and payment of funds to the wrong TSA account; and the perverse interpretation of institutional financial autonomy vis-à-vis the principle of the unity of cash and of the Treasury.
Operational challenges are associated with the way processes, procedures, rules and guidelines are interpreted and applied in the course of discharging individual and institutionalresponsibilities.The interaction of each participant with the TSA is ultimately informed by his understanding of these basic elements. What is TSA? Why was CBN chosen as TSA bank? Why were banks instructed to transfer funds to TSA using specified payment gateway? Must sub-accounts exist as physical CBN bank accounts or as virtual front-end sub-accounts with appropriate controls? Does operating within the TSA erode the autonomy of the National Assembly, the Judiciary, Independent National Electoral Commission, and other constitutionally established bodies? There are, of course, no universally acceptable answers to these questions, and I wish to leave them open-ended.
The last set of challenges relate to the information and communication technology (ICT) tools that drive the TSA. TSA is an ICT-intensive endeavour and it is to be expected that a few pain points would arise from this front. Positive user experience is an essential element in the mix of syntactic sugar necessary to get the buy-in and eventual ownership of the entire TSA project by MDAs, the partners, stakeholders and the public at large. Users at all levels want fast, reliable and secure connection and transaction processing. Inadequate ICT infrastructure leading to slow consummation of transactions and generation of reports is one lingering ICT challenge begging for solution. Moreover, the sheer scale of the TSA and the deluge of financial and non-financial data generated in the process create an opportunity for effective data mining, analysis and management to support fiscal and monetary policy formulation. It also aids reporting, accountability and transparency. The ICT infrastructure in use is yet to rise to this challenge.
The good news is that the odds are in favour of TSA sustainability judging from its antecedents. Conceived in 2004, TSA has survived four regimes and two political parties. When a reform enjoys popular appeal; is publicly adopted, owned and protected; it becomes a public trust reducing the operators to mere custodians and trustees with limited ability to deviate from its core objectives.
Discussions are on-going with relevant stakeholders towards addressing all observed challenges. There is going to be better coordination and integration with core cash management activities to further optimize the benefits derived from cash resources, properly align borrowing plans and further reduce cost. The political environment has been outstandingly favourable with the Presidency standing as a bulwark. The National Assembly is beginning to pay attention and to provide the much needed parliamentary support and positive vibes that leave nothing but hope in the horizon.
There are other pointers to the prospects of long term sustenance of the TSA. Its implementation so far has relied exclusively on local resources; human and material. Unlike similar projects undertaken by the public sector, the implementation team is made up of civil servants. The major ICT gateway driving the TSA is wholly developed, owned and managed by Nigerians.
There is no better time than now to incinerate the pernicious mismanagement of the past and usher in a new era of responsible public financial management in Nigeria. For those of us who have been called to midwife the new era, it is nothing but a labour of love. TSA shall live up to public expectation.