Banks and TSA policy

Apart from lamenting the parlous state of the nation’s economy after the Monetary Policy Committee (MPC) meeting on Sept. 22, Central Bank of Nigeria (CBN) Governor Godwin Emefiele announced that the regulator had slashed its Cash Reserve Ratio (CRR) to 25 percent from 31 percent but retained the Monetary Policy Rate (MPR) at 13 percent and liquidity ratio at 30 percent.

The move, which came as tension mounted in Nigeria’s financial sector over the implementation of the Treasury Single Account (TSA) policy, indicates that President Muhammadu Buhari’s administration is ready to move away from restrictive to accommodative monetary policies that would stimulate economic growth and job creation.

The CRR reduction couldn’t have come at a better time as it will help douse the tension in the banking industry over impending job losses, profit evaporation and the overblown issue of liquidity squeeze following the full implementation of the TSA effective on Sept. 15.

Before now, there were reports that some banks had already started downsizing their workforces.

The 14 percent cut in CRR is meant to inject more liquidity into banks and cushion the effect of the withdrawal of public funds estimated at between N1.2 to N2 trillion or 10-15 percent of banking deposits, when Federal Ministries, Departments and Agencies (MDAs) fully comply with the TSA.

Emefiele also said on the sidelines of the MPC’s 246th meeting in Abuja that the CBN had not received any directive exempting any (MDAs) from the TSA as some of them insinuated.

“I have not seen any memo that exempts any MDA from the TSA. I will advise all those who think they have been exempted to please avoid creating confusion. I will appeal to those affected by the TSA to please continue to comply with the movement of accounts to the CBN,” Emefiele was quoted as saying.

Reports indicate that while some MDAs have complied with the TSA, others are still struggling to do so. But the CBN’s clarification, it is hoped, would prompt the defaulting organisations to comply to save themselves from possible sanctions.

The TSA is a unified bank account which enables consolidation and optimal utilisation of government’s cash resources. It is an account or a set of accounts through which the government transacts its receipts and expenditures, and gets a consolidated view of its cash position at any particular time.

It will help the federal government block the many leakages in revenue generation, increase efficiency, transparency and accountability in the nation’s financial system. TSA is indeed a prerequisite for modern treasury management which is considered as an effective tool for government to, through the finance ministry, keep track and have oversight of all its cash resources.

Efforts to implement the TSA have been on since 2012 but were scuttled by the lack of political will by ex-president Goodluck Jonathan’s administration and stiff resistance by commercial banks that are over dependent on government deposits and the rent system, rather than engaging in real banking, giving longterm loans to the productive sector to boost national economic growth.

The MDAs are reluctant to comply with the policy because some unscrupulous top government officials usually deposit the funds in fixed accounts and collect mouth-watering interests on them.

But the time has come for these shenanigans to end in view of the debilitating state of the economy thanks to the continued decline of our foreign reserves triggered by the slump in oil prices and profligacy of previous administrations.

President Buhari must put his foot down and ensure that the TSA is implemented because that will go a long way in facilitating his much -vaunted war against corruption and drive to reposition the economy.

But in doing that, he should understand that the delay in releasing his economic blueprint, and lack of public statements on key reform initiatives are doing Nigeria more harm than good as potential investors have no idea in which direction his administration is heading. The absence of a cabinet, especially a finance minister, is also taking a toll on the nation.

Unless these issues are urgently tackled, like Emefiele observed after the MPC meeting, Nigeria’s economy may be heading into a meltdown. That will be disastrous.