Assignment on Treasury Single Account (TSA) Policy in Nigeria

Government banking, cash flow arrangements and Public Financial Management (PFM) system are important factors for effective and efficient utilization and management of government’s financial resources.

Ensuring the above is vital, especially, with regards to domestic financial resources mobilization for the implementation of economic development policies in developing economies like Nigeria.

One of the internationally accepted pre-requisite mechanisms for guaranteeing efficient government fund management system is through the establishment of a unified structure of government bank accounts called Treasury Single Account (TSA) system.

We shall in this assignment on Treasury Single Account (TSA) in Nigeria be discussing briefly the history and development of TSA in Nigeria, the working principles of Treasury Single Account (TSA) and,

Finally, we shall be discussing the general benefits of Treasury Single Account (TSA), principally, as it relates to Nigeria’s quest for rapid and sustainable economic growth and development.

To achieve the objectives of this article, it is important that we get full understanding of the concept of Treasury Single Account (TSA).

What then is Treasury Single Account (TSA)?

IMF, (2011) defined Treasury Single Account (TSA) as a unified structure of government bank accounts enabling consolidation and optimum utilization of government financial resources.

Treasury Single Account (TSA) as the name implies is a network of government subsidiary accounts all linked to a main account such that, transactions are effected in the subsidiary accounts but closing balances on these subsidiary accounts are transferred to the main account at the end of each business day.

Treasury Single Account (TSA) policy was first recommended in Nigeria by the Federal Government’s Economic Reform and Governance Programme in 2004.

The resultant intense pressure from the banking industry based on probable adverse impacts of the policy on their effective and efficient operation somewhat led to dumping of the recommendation in 2005.

Treasury Single Account (TSA) which is also part of the Public Financial Management (PFM) reforms in Nigeria was designed to address weaknesses responsible for ineffective and inefficient public cash management.

The adoption of a Treasury Single Account (TSA) by the federal and some state governments is seen by many as aimed at plugging loopholes in the Nigerian Financial System.

We should not forget that Treasury Single Account (TSA) policy as embedded in Public Financial Management (PFM) in Nigeria falls under Pillar 3 of the National Strategy for Public Service Reforms towards Vision 20:2020.

Another fact about Treasury Single Account (TSA) policy as applied in Nigeria is that, maintaining multiple Revenue Bank Accounts (RBA) by ministries, departments and government agencies as formerly done in the country was clearly against the Nigerian Constitution.

Sections 80 of the 1999 constitution as amended directed that all revenues or other moneys raised or received by the Federation shall be paid into and form one Consolidated Revenue Fund of the Federation.

The order on Treasury Single Account (TSA) which was initiated in December 2014 with February 28^th, 2015 as deadline for the implementation finally came into effect on 11^th August, 2015 and marks the beginning of MDAs’ retirement of revenues due to the Federal Government into a unified account.

The directive applies to the ministries, departments and agencies that are funded from the Federation Account such as Nigerian National Petroleum Corporation (NNPC), the Central Bank of Nigeria (CBN),

The Securities and Exchange Commission (SEC), the Nigerian Ports Authority (NPA), The Customs Service (NCS), Nigeria Immigration Service (NIS), Federal Inland Revenue Service (FIRS) and a host of others are to pay all their revenues to a sub-account linked to the Treasury Single Account at Central Bank of Nigeria.

It is progressive that the obvious breach of the constitution that underscores the rot in the utilization and management of Nigeria’s public finances is now a thing of the past.

According to IMF, (2011) an effective Treasury Single Account (TSA) system is founded on three key principles:

i.                    Unification of government bank accounts: Although a Treasury Single Account (TSA) structure can contain ledger sub-accounts in a single banking institution (not necessarily a central bank), and can accommodate external zero-balance accounts (ZBAs) in a number of commercial banks,

 These separate accounts are integrated with a top account called the Treasury Single Account (TSA) main account and usually at the central bank for netting off their balances usually at the end of each day to get the consolidated cash position.

Unification of government bank accounts enables ministry of finance to oversee government cash flowing in and out of these bank accounts and allow complete fungibility of all cash resources.

ii.                  Controlling Authority over the TSA Account: Institutional structures and transaction processing arrangements determine how a Treasury Single Account (TSA) is accessed and operated.

No other government agency is allowed to operate bank accounts outside the oversight of the treasury or authority in charge of the fund.

The treasury, as the chief financial agent of the government manages the government’s cash (and debt) positions to ensure that sufficient funds are available to meet financial obligations, idle cash is efficiently invested, and debt is optimally issued according to the appropriate statutes.

iii.                Comprehensive Coverage: The TSA system has a comprehensive coverage detailing items to be included in the payment or withdrawal fund from the account.

All cash flows related to government revenue, expenditure, donor financing, debt issuance and amortization (including those associated with external debt) should be fully integrated into the Treasury Single Account (TSA) system.

In some cases, debt management including issuance of debt is done by a Debt Management Office (DMO).

Treasury Single Account (TSA) system should ideally include cash balances of all government entities, both budgetary and extra-budgetary, to ensure full consolidation of government’s cash resources.

To be concluded in the next blog post when we shall be discussing specific advantages of Treasury Single Account (TSA) to Nigeria.