For the first time in a long time, government money is going to be in government bank — the CBN. That is how good the news can be. No more can heads of revenue generating ministries, departments and agencies fix the revenues they generated in commercial banks’ high-interest-yielding deposit accounts. And with that, illegally earn money.
Also imagine non-revenue generating MDAs, in copying their revenue generating counterparts, too place their budgetary allocations in multiple high-interest-yielding deposit accounts, and with that divert money meant for financing both capital and recurrent. And in doing so, not only are salaries and wages not paid but projects are either delayed or permanently abandoned.
Just imagine also how section 22(1) of the Fiscal Responsibility Act of 2007, which allows revenue generating MDAs to remit only 80% of the operating surplus to the Consolidated Revenue Funds (CRF). And by driving operating costs so high close to 100%, which makes 80% of their operating surplus close to nothing, to the extent that at the end of the year these MDAs remit nothing to CRF. How bad will Nigerians feel on hearing that because of these lacunas and illegalities, government has been losing such mind-blowing revenues in their trillions of naira annually? For example, that between 2009 and 2012 government had N9.4trillion not remitted?
That is why Nigerians should applaud President Buhari for his boldness when on Sunday, August 9, 2015 he announced that all MDAs should transfer all their accounts with commercial banks to Treasury Single Accounts (TSA) with immediate effect. Yes, former President Jonathan gave similar directive in January with February 28, 2015 as the deadline but as usual, lacking leadership, he was ignored by most of these MDAs. The good news is that by August 11, most of these MDAs have started complying.
What this means is that henceforth, MDAs will no longer access public funds unless money from budgetary provisions. This is how it is supposed to be here in Nigeria as it is the case in modern economies around the world. This insistence on Treasury Single Account means fiscal discipline, efficiency, and accountability, on the part of government. In fact, this blockage of government revenue diversion and looting using TSA besides leading to the consolidation of government revenues, incomes, and receipts, it will also lead to the optimal utilization of government cash resources, including creative investment of public funds in the critical development sectors of the economy.
But with TSA leading to the closure of about 10,000 multiple bank accounts operated by MDAs in commercial banks, banks will have to wake up from their slumber. This is because the era when government’s money is either lent back to government or invested in forex speculations is over. It also means that no longer at Bankers’ Committee meetings member banks will demand that the CBN pursues their self-serving high interest rates to their benefits and those of heads of MDAs who placed public money in their high-interest-yielding fixed deposit accounts. With TSA, government can easily quarantine its revenues, with intended consequences including forcing interest rates to naturally nose-dive, since no serious business should be ready to borrow at such double digit rates when the economy is struggling at between 4 and 5 per cent.
TSA is forcing banks to leave their comfort zone caused by dependence on government money to now become as creative and inventive as it is the case in modern economies around the world, which is to seek private deposits through investing in the real sector of the economy. In fact, with economic financialization soon over, banks will discover that their survival is dependent on their embracement of fractional reserve banking, which is leaving a fraction of private depositors’ funds in reserve while using the main deposits to chase high profit-yielding investments.
This means that soon the era of economic diversification through industrialization will soon begin. What this also means is that at the next Bankers’ Committee meeting, banks will insist that the CBN revisits its current cash reserve ratio (CRR) on private deposits from 31% to possibly 0% so that they can begin to attract more private deposits.
But for this TSA policy to be maximized, we need it to be accompanied with the Fiscal Sunshine Bill, which if enacted will open up the financial activities of government in a way that there will be no more hiding place for those who divert or loot government money. For instead, with Fiscal Sunshine Act in place, budgeting process and implementation, including contract awarding should all be in the open for Nigerians to see both how revenues are generated and how public money is being spent by those in government, and why.
Posting government transactions online for millions of Nigerians anywhere in the world to see, means that the time for contracts and procurements to be done through the backdoor is finally over, especially with Fiscal Sunshine Act insisting on conducting contracts in the open, including having them recorded and televised. And with spending public money outside appropriation made a serious criminal offence, attracting not less than ten years in prison without an option of fine along with the repayment of the money, no doubt, Nigeria would have brought public corruption to a standstill.
Enwegbara, a development economist, writes from Abuja.