How successful is TSA in Blocking Leakages in MDAs

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The Treasury Single Account (TSA) has been acknowledged as one of the most successful Public Financial Management reforms in Nigeria, but NIYI JACOBS writes that much needs to be done to achieve the desired outcome.

The issue of revenue accruals, especially who collects what, has always ignited heated argument with passion among feuding parties due to the dwindling financial position of all the three tiers of governments in the country and each entity often tried to advance superior reasons to justify its position. The federal, states and local government councils are presently contending with developmental challenges with acute shortfall in revenue earnings.

This is because over the years, the economy has relied heavily on revenue generated from the sale of crude oil for the running of government activities. This contributed immensely to reckless spending and mismanagement of public funds as several government agencies in the country collected money on behalf of the federal government. They had the latitude to spend part of it since they only needed to remit only a portion of the declared amount.

The multiplicity of Ministries, Departments and Agencies (MDAs) collecting revenue on behalf of the Federal Government culminated to several challenges, partly due to high cost of cash management in Nigeria’s economy, leading to operation of multiple accounts. The MDAs have been operating multiple accounts for revenue collection and they spent the monies contrary to the provision of the Nigerian constitution, which stipulates that all government revenue must be remitted into a single account, the federation account.

As a result of economic exigencies at the time, the Central Bank of Nigeria (CBN) was directed to open a consolidated revenue account where all government revenue, incomes and inflows were pulled into one single account maintained by the apex bank, known as Treasury Single Account (TSA).

Effective 2012, the Federal Government began implementation of the first phase of a single account policy with 217 MDAs as a pilot phase. Interestingly, about N500 billion was saved from the reckless spending of the MDAs. This achievement motivated government to urge all banks to employ the technology platform that will help to accommodate the TSA policy.

In essence, the TSA is part of the economic reform programme of the Federal Government enunciated to facilitate a unified structure of government bank account for all government transactions.

The new system of accounting is in tandem with the campaign for zero-tolerance for corruption. It is expected to consolidate all cash resources of the government in all MDAs which were previously located in various bank accounts, under one unified management and control. Apart from availing the government of effective control of cash resources, the TSA also guarantees timely information on government’s cash resources real time and harmonises government servicing of its obligations.

Also, the TSA enhances government revenue generation; ensures transparency, accountability in government expenditure, and helps to minimise revenue leakages that have been a major challenge to the growth and development of the economy.

Arguably, the introduction of TSA has put a stop to the MDAs managing their finances like independent entities, which only remit revenue to government treasuries at will.

This can be attested to when viewed from the prism of the impact of TSA on economic development of the country. Research results indicate that the “implementation of the TSA has a significant scientific influence on the growth of the economy in real GDP terms, while revenue generated by government and per capita income were influenced by its operation.”

The effect on government internally generated revenue performance has been impressive. For instance, between January and October 2021, a total of N86 billion revenue was generated through this means.

Aggregate collection of N7 trillion was made from 22 million transactions between January and November, 2021 while N19 trillion worth of payments were processed from 20 million transactions within the same period.

The amount generated goes to show the enormous volume of transactions processed on the TSA platform and the need to leverage on the onboarding of additional Payment System Service Provider (PSSPs) to reduce the cost of collection which is currently N150 per transaction. Government is of the opinion that there is sufficient room for reduction in cost of collection to no more than N50 per transaction.

These startling positive indicators might have influenced the decision of the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed Shamsuna to inaugurate the reconstituted Treasury Single Account (TSA) implementation structures; namely: TSA Supervisory Board and Inter-Ministerial TSA Implementation Committee in Abuja, last week.

First, like anything Nigerian, the composition of the team reflects the diversity of interests that TSA serves and demonstrates the productive partnership of public and private sectors in policy formulation.

From inception, the Federal Government had set out to be transparent and to provide a level playing field for all participants. It is in line with this that, although it could have adopted selective collecting bank approach as was popular then, it opened the collecting service to all licenced Deposit Money Banks. For this reason, it foreclosed any need for banks to either apply or lobby to participate in TSA collection and payment.

At the initial stage, participation of more than one PSSP was a challenge. The Government Integrated Financial Management Information System (GIFMIS), which was the first TSA management application, was designed to interface with T-24, the CBN core banking application through a single payment gateway.

The original intention was to use Real Time Gross Settlement System (RTGS) to be provided by the CBN; however, unable to provide the service at the time, the apex bank opted for systemspecs/remita after a rigorous competitive procurement process. That initial constraint ultimately paved way for Remita to become the dominant TSA PSSP.

Notwithstanding the obvious constraint, government insisted that other service providers should be accommodated in the TSA collection process provided they were integrated with Remita because without such integration, it would be difficult to keep track of transactions in diverse, stand-alone collection applications.

This singular act, innocuous at the time and borne out of the desire to do the right thing was unfortunately misunderstood, generated too much controversy and has become a source of needless distraction for everyone.

Interestingly, through the work of the committees that was inaugurated, government expects to finally open the TSA to multiple service providers to put an end to the agitations and discontent of the past.

Indeed, of all the reforms embarked on by the Federal Government, TSA is arguably the most popular both locally and internationally. As a public trust, Nigerians monitor its progress and voluntarily report observed non-compliance to appropriate quarters. Internationally, it is recognised as one the most successful Public Financial Management reforms out of Africa. This recognition is attested to by the bilateral co-operation Nigeria has entered with other countries to share experience with them as they implement similar reforms in their countries.

For the Government, the TSA experience has been a pleasant one. The centralisation of banking arrangement has made it easier to determine government cash balances, reduce cost of borrowing, enhance liquidity, block leakages and improve internally generated revenue performance. Using the TSA platform, government said it has since “automated direct deduction of operating surplus of eligible agencies. At the last count, 16 agencies are covered and more will be added in the coming months”