With the Federal Government’s inclusion of payment switching companies Interswitch and eTranzact to provide electronic collection for treasury single account (TSA), it is expected that financial leakages in ministries, departments and agencies (MDAs) of government will thin out.
According to a circular signed by Sam Okojere, CBN director, Banking Services Department, and addressed to all deposit money banks as well as CEOs of Interswitch, eTranzact, SystemSpecs, and NIBSS by the government in December, the CBN introduced a new pricing regime for the enhanced TSA e-collection model, which kicks off January.
The CBN noted that all government collections must be channelled through the new TSA e-collection model while eTranzact and Interswitch will be joining SystemSpec, operator of Remita in collecting TSA payments from MDAs.
Accordingly, transaction charges borne by the payer and carried out through Point of Sale (PoS) shall attract a fee of N150 in addition to 0.50 percent of the amount being paid subject to a maximum of N1,000 per transaction.
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The apex bank further listed the sharing formula to include 43 percent for PSSPs; 33 percent for collecting banks; 11 percent for the CBN; 10.5 percent for NIBBS, while the Office of the Accountant General of the Federation (OAGF) will have 2.5 percent.
“It is important that switching companies with the full range of switching capabilities are enabled with TSA collection connectivity, because of the direct connection they have with all the banks and the various payment and collection channels they have built over time,” a source close to the matter told BusinessDay.
Prior to the TSA reform, the Federal Government MDAs held more than 5,000 accounts in different banks, according to some reports. As a result of these fragmented banking arrangements, the cash resources of the government were not being consolidated and huge cash balances remained idle in MDAs’ bank accounts, while the government incurred ways and means charges to meet the cash shortfall.
By the end of 2009, the government had an overall cash balance of more than N362 billion in the MDAs’ various bank accounts (held both at the CBN and commercial banks) but the CBN still needed to provide ways and means financing of N147 billion through the Consolidated Revenue Fund to meet the cash requirements.
To address the problem, the CBN asked for help from the Fiscal Affairs Department (FAD) of the International Monetary Fund. The series of meetings that followed led to the birth of the TSA.
As described by the CBN, the TSA)is the operation of a unified structure of government bank accounts, in a single account or a set of linked accounts for all government payments and receipts.
The TSA is primarily designed to bring all government funds in bank accounts within the effective control and operational purview of the Treasury, in order to: Enthrone centralised, transparent and accountable revenue management; Facilitate effective cash management; Ensure cash availability; Promote efficient management of domestic borrowing at minimal cost; Allow optimal investment of idle cash; Block loopholes in revenue management; Establish an efficient disbursement and collection mechanism for government funds; Improve liquidity reserve; eliminate operational inefficiency and costs associated with maintaining multiple accounts across multiple financial institutions.
Data from the Office of the Accountant-General of Federation (OAGF) show that the gross accruals into the TSA reached over N19 trillion between August 2015 and February 2020. The Federal Government also saves an average of N45 billion monthly in interest payments from the TSA.
The CBN had in its 2016 guideline approved more than one platform for the controlled take-off of the TSA scheme. The platforms approved include SystemSpec, Interswitch, Unified Payment Services, eTranzact, and NIBSS. However, over the years, the collection has only been carried out by Remita, a platform owned by SystemSpecs.
While some progress has been made, authorities have not stopped worrying over missing revenues. In the third quarter financial report for 2020, the CBN noted the estimated retained revenue of the Federal Government at N842.09 billion fell short of the budget benchmark of N1.458 trillion by 42.3 percent.
“The shortfalls in the retained revenue of the Federal Government were attributed, largely, to the poor performance in collections from the FGN Independent Revenue sources, which at N56.21 billion, was 75.9 percent and 72.9 percent below the benchmark of N233.21 billion and N207.34 billion in the corresponding period of 2019, respectively,” the CBN noted in the report.
The new guideline is not only the CBN reverting to its 2016 position, it is also an indication that the single collector strategy has not fully addressed issues of missing revenues from MDAs, hence the apex bank is hoping to reduce the difficulties experienced with using a single collector.
An expert who would not want to be mentioned told BusinessDay that operationally, involving switching companies like Interswitch and eTranzact was a more optimal approach as it eliminates the single point of failure threat of having one party integrated for TSA collection.
“It is important that switching companies with the full range of switching capabilities are enabled with TSA collection connectivity,” the expert said.
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