The Nigerian Government has decided to engage banking procedures that constitute a significant feature for a well-organized management and control of government’s financial resources. To this end, the need to design banking procedures that minimize the cost of ‘government-borrowing’ and maximize the opportunity cost of cash resources has become most paramount to ensure that all cash received is available for timely settlement of government’s expenditures and payments. Before TSA, the Nigerian Government operated a disjointed system of receipts and payments which, naturally, would make it extremely difficult to ascertain an amalgamated position of the nation’s financial resources. As a result of these, the government lacks a central financial control of its financial resources as well as lacks the ability to execute its budget without borrowing even while huge government financial resources lay idle in accounts of spending Ministries, Departments and Agencies (MDAs) in various deposit money banks.
TSA is an indispensable tool for consolidating and managing government’s cash resources in order to minimize borrowing costs associated with fragmented government banking procedures. The institution of TSA is currently the preferred option of public financial management reform agenda globally.
TSA is an amalgamated structure of government bank accounts that ensures a consolidated view of government cash resources through a set of principles. The principles of ‘unity of cash’ and ‘unity of treasury’ are the most basic foundation a good TSA must have. TSA is a set of linked bank accounts through which all government receipt and payment transactions are made, allowing for complete and timely information on government cash resources. The Government Integrated Financial Management Information System (GIFMIS) is expected to facilitate a real-time daily balance update. A government unable to effectively control its cash resources will be faced with the multiple problems of its institutional deficiencies.
The Benefits of TSA
The main object of operating a TSA is monetary and budgetary and this is to ensure an efficient and effective collection, consolidation and control of government cash resources. The consolidation of cash resources through a TSA arrangement makes possible government cash management by eliminating unnecessary borrowing costs. In the presence of TSA, idle cash resources are easily aggregated and utilized to the benefit of the Government’s developmental goals. Asides from monetary and budgetary management benefits of the TSA, there are other objectives for setting up TSA which include:
1. Minimizing operations costs during budget execution:
a. especially by controlling the delay in the remittance of all government revenues by the collecting agents
b. making prompt payments of government expenses
2. Easing reconciliation of Government financial data and records
3. Efficient control and monitoring of Government funds allocated to various MDAs
4. Providing superior coordination and implementation of Government monetary policy
Because the Central Bank is the Banker to Government, the custody of the TSA must therefore be with the Central Bank. With especial regards to revenue collections, the government banking procedures may consist of several bank accounts which can be maintained with commercial banks but the cash balances in all such government accounts should be cleared daily and swept to the TSA which is the main treasury account at the Central Bank. Locating the TSA at the Central Bank offers advantages including:
1. With the Central Bank acting as clearing house for government operations, the segregated obligations and responsibilities of all participating banks (the Central Bank of Nigeria and various Commercial Banks) serve as clear-cut policies for banking procedures
2. Limitation of government credit risk exposure and providing safety for government cash deposits
3. Government liquidity is efficiently management through the Central Bank’s coordination of government’s cash profile alongside governments debt obligations
4. Government banking procedures become more prompt and cost-effective
Features of a well structured TSA
Draining surplus cash liquidity from Commercial Banks through the open market operations in order to prevent reckless advance of credits by Commercial Banks imposes costs on the Central Bank. To prevent this and several other problems, a good TSA must have the following features:
1. A unified structure for government banking procedures that improves Government’s ability to monitor cash flows (in and out of the main-TSA and sub-TSAs)
2. An electronic Banking platform that ensures real-time fungibility of all cash irrespective of the end use by distinguishing individual cash transactions for control and reporting purposes, yet allow for interchangeability with other funds of the same type through the accounting system thereby creating a system of cash management alongside a transaction level control
3. The consolidation of government cash resources becomes comprehensive and encompasses all government cash
4. Accessing and operating the TSA mainly dependent upon institutional structures and payment settlement systems
Should there be need to engage Commercial Banks in the operation of the TSA in Nigeria, the Central Bank of Nigeria (CBN) playing the lead role while maintaining the TSA must ensure that government’s retail banking transactions are performed effectively and efficiently by the commercial banks that shall in turn guarantee all federal government entities (MDAs) and their transactions are well captured. Autonomous government entities, social security funds, trust funds, extra-budgetary funds, loans from donor agencies and multilateral organisations must also be encompassed by the TSA. It is important to extend the operations of the TSA to the other levels of government (State and Local) through the use of sub-TSAs and where this is not possible, every State or Local government must be compelled to institute TSA at their own level of government.