Unending Adjustment in TSA Tariff

Emma Okonji writes on the implication of the continued adjustment of the tariff for the Treasury Single Account, which is capable of dampening innovation in the country

The federal government, last week, announced its intention to further adjust the tariff rate for Treasury Single Account (TSA), from its current one per cent that is accruable to the banks that are implementing TSA and the Financial Technology (FinTech) player that developed Remita, a payment gateway technology solution that is driving TSA. The frequent adjustment in TSA tariff by the federal government is becoming worrisome to some stakeholders as well as players in the telecoms industry that are currently pushing for the reversal of Nigeria’s bank-led cashless economy to telco-led, which is the practice in some regions.

The continued adjustment in the TSA tariff, according to them, was either an indication of government’s insincerity in fighting financial corruption and leakage in the system.

This, they further argued, could be an indication that the government was yet to see the huge benefits that Remita, the technology solution from SystemSpecs, one of the numerous FinTech players in the country’s financial industry space, has brought to the county’s financial transaction table.

FG’s Position The federal government, last week shocked Nigerians again, when it introduced a new TSA tariff regime effective November 1, where the service charge of all payments made to government agencies will be borne by the payer.

The federal government had explained that service charge on all payment to its Ministries, Departments and Agencies (MDAs) would be borne by the payer.

A statement released from the office of the Accountant General of the Federation (AGF), Ahmed Idris, which was the outcome of a stakeholders’ sensitisation forum on TSA had said: “In line with the global best practices and amidst dwindling revenues, the federal government has approved a new TSA tariff model which mandates that the service charge on payment to its Ministries, Departments and Agencies (MDAs) from November 1, 2018 would be borne by the payer.”

Under the new model, according to information emanating from the office the AGF, all funds collection into the TSA would require payers to bear the transaction cost, as against the initial plan where the federal government takes responsibility for the payment of transaction cost on TSA.

The new model would therefore replace the previous one wherein the merchant—in this case, the federal government—bore the charges on all transactions to the service providers on behalf of payers.

In the previous tariff regime, the federal government is owing the technology service providers and the participating deposit money banks up to two years in service charge, a situation that has compelled SystemSpecs, the technology solution provider, to threaten to withdraw the technology solution and stop rending technical services support to TSA, if government fails to remit its service charge.

TSA Agreement Deal The federal government had long discovered that there were huge financial leakages in the government circle, where government has over 20,000 accounts from its over 1,000 MDAs, scattered across various banks, with each of the accounts having huge money deposits that the federal government cannot readily account for.

Worried by the situation, and in a bid to address financial leakages in government MDAs, the former administration, under the leadership of President Goodluck Jonathan, in 2012, commenced the pilot TSA scheme using a unified structure of accounting for 217 MDAs for accountability and transparency in public fund management.

In August 2015, the initiative was fully implemented and covered over 1000 MDAs after a presidential directive from the present administration of President Muhammadu Buhari.

At commencement, all players on the TSA account implementation, including all commercial banks, SystemSpecs and the Central Bank of Nigeria (CBN), agreed that a fee of five per cent of funds collected is payable. But on seeing the huge volume from five per cent service charge after the initial transaction was carried out, government reversed the service charge from five per cent to one per cent and asked SystemSpecs to refund the five per cent service charge already collected, which the technology company refunded without hesitation.

The one per cent agreement was reached after SystemSpecs suggested 1.5 per cent and the banks insisted on five per cent as service charge for TSA transactions, but the federal government decided to fix one per cent, which the parties involved later agreed to.

While SystemSpecs is the technology company that developed the payment app called Remita, that is currently driving TSA in Nigeria, the banks are using Remita to implement TSA among MDAs of government, as directed by government.

The payment app is a single online platform that manages financial payments and it is capable of blocking all financial leakages in the government circle.

The New Twist The new arrangement, according to some experts, is worrisome because government has not paid the service charges also known as the transaction cost in the last two years.

Government had only paid once in 2016, and since then had refused to make further payments even though the implementation of TSA is ongoing, and saving government huge sum of money that would have gone down the drains as financial leakages. Worried by the new twist from government, indications emerged this week that the service providers and the participating banks are threatening to withdraw their services and halt the TSA implementation process.

Reacting to the new plans of government over who bears the service charge, the President, Institute of Software Practitioners of Nigeria (ISPON), the umbrella body where SystemSpecs operates from, Dr. Yele Okeremi, said: “If government is trying to shift the responsibility of payment of service charge to those that initiate the transfer to TSA account, then government must be ready to go the extra mile of providing different alternative channels for the payment of TSA, to enable the payers have the opportunity to choose among the available payment channels, based on the service charges on those channels.”

Okeremi, who gave an analogy of how bank customers who initiate online transactions, bear the transaction cost, and how merchants bear the transaction cost for all financial transactions on Point of Sales (PoS) terminals, said government has the right to use any cost model for TSA transaction, were either government or the initiator of the TSA transaction pays the service charge.

But he insisted that if government decides to shift payment of transaction cost to the payer, then government must be ready to provide different alternative channels for payment of TSA, where service charges will vary from one channel to another.

He, however, called on government to pay the 22 months outstanding service charge to SystemSpecs and the banks, and live up to expectations in its crusade in driving ‘Ease of Doing Business’ in Nigeria.

A reliable source in the Federal Ministry of Finance, who spoke with THISDAY on the issue, said the major reason the federal government approved a new TSA tariff model was to ensure that the debts no longer accumulate.

But industry stakeholders have argued that the position of government was wrong since the money collected through the process of TSA was meant for government.

They said it is left for government to take responsibility of the payment of service charges and release the money without further delay.

Under the terms of the service which was agreed after some controversies, SystemSpecs is entitled to one per cent of each in-bound transaction and up to N5, 000 for each out-bound transaction. The firm was last paid in 2016, while as of December 2017 the total outstanding against SystemSpecs was in excess of N10 billion for out-bound services.

According to the source, “The service provider used to get one per cent on each transaction on that platform, which was re-negotiated to one per cent, but a maximum amount of N5, 000. Then there was a disagreement on the effective date of the difference.

“But they eventually agreed with the date proposed by the federal government and for 22 months after that agreement was reached, they have not been paid and the debt has been accumulating. For now, the government’s indebtedness is in excess of N10 billion and the service providers have threatened to withdraw their services and halt implementation of TSA.”

Benefits of TSA Despite the fact that TSA is saving about N40 billion monthly for the federal government, according to statistics from the office of the Accountant General of the Federation, the federal government seems not to appreciate the benefits of Remita to TSA, hence its unending adjustments on tariff and its refusal to pay the accumulated service charges in the last 22 months.

Before the full implementation of TSA in 2016, the federal government had over one thousand MDAs and each had several bank accounts, with millions and billions of naira, sitting with the banks. At that time, some MDAs that needed money to execute some projects, usually go to the banks to borrow money belonging to other MDAs from the banks and pay back with lots of interest. The federal government, when in need of money, would sell treasury bills to the banks, and the banks would pay for the treasury bills from the MDAs money belonging to government, but sitting with the banks. Government will later return the money to banks with huge interest rate of 15 per cent. So it was a game of government going to the banks to borrow money belonging to government and paying back the money with high interest rates.

Through the platform, government has been able to get accurate financial data for better decision making, some stakeholders explained.

According to them, financial forgery in the system was high and uncontrolled before the implementation of the initiative.

What the Remita system does is to give receipt for every payment made into the TSA account. They explained that before the implementation of the solution, government had several thousands of accounts through their MDAs and because government do not have idea of all the bank accounts, some of the monies that were not spent at the end of the year, go into the hands of individuals within the MDAs unaccounted for, and government was losing huge money to the faulty system whose accounting system was shrouded in secrecy.

“Before the implementation of TSA, some MDAs were using one receipt to make claims of several projects that were not executed, thus defrauding government of huge amount of money. There are number of cases that are under the investigation of the Economic and Financial Crimes Commission (EFCC), where MDAs use a single receipt from a project that had been completed in the past, to make several claims for new projects that were not carried out in the first place, and they do this to defraud government,” the stakeholders said.

They further said: “Government contractors will lift oil at a cost of over N100 million from a particular oil depot and use same receipt to lift oil from another deport, and they do this over and over again without the government knowing or in connivance with insiders who will pretend not to know that the same receipt had been used to lift oil in other depots.

“But Remita acknowledges once a receipt is used and stop its reuse.”