Monday, April 15, 2024

Banks, others panic as TSA effects bite harder

Banks and stakeholders in both the private and public sector are currently groaning under the burden of complying with what appears to be an ‘alien’ TSA culture.

This is coming on the heels of a notice that the Central Bank of Nigeria will sanction the chief executive officers of some financial institutions next week for failing to remit about N300 billion into the TSA as directed by the Federal Government.

While the banks are worried about thinner liquidity, the private sector is concerned about loan accessibility under the current situation.

Critics argued that, while the new policy might signal the desire of the Federal Government to tighten loopholes in the system, particularly now that it had leaner revenue, the imposition of a single account on all agencies would be counter-productive. According to them, the development may affect lending, especially since banks were not even lending before.

Fomer Group Managing Director, First Bank Nigeria, Mr. Bisi Onasanya, had confirmed that there would be significant reduction in the inflow of government funding into the banking system as a result of the new policy and feared that it might reduce liquidity in the financial sector.

“It has almost necessarily moved away public accounts at the federal level from the vaults of commercial banks into the CBN’s. Liquidity is shrinking also and you have to look at the impact on your liquidity ratio and liquidity management in all the things that you do,” Onasanya had stated.


An economist, Mr. Ola Banjo, argued that the initiative would drastically reduce liquidity and thus raise interbank rates. To him, interbank rates that have risen to 50 per cent recently may rise even further, as the borrowing rates will also increase.

“The regulator needs to put aside bail-out plans for the vulnerable banks, including direct market intervention and reduce borrowing costs to build confidence in lenders,” he said. To implement this, Banjo added that the CBN should consider using the TSA account only as a control account, while it opens subsidiary accounts for all individual ministries, departments and agencies, both for performance review and funds administration.


However, some financial experts insist that the move will enable the government to monitor what comes into its coffers. According to a chartered accountant, Mr. Ayodele Otitoju, the TSA initiative is necessary to reduce the rate of corruption in the country, especially among public office holders.

Otitoju, a fellow of the Chartered Institute of Taxation of Nigeria, stated that the policy had been in existence in Nigeria for a while, adding that “the commercial banks in a search for funds are expected to go to the government and talk them into transferring some of their accounts to them and this, over the period, has been abused,” he said.


Contrary to the speculation that the policy would lead to job losses in the banking sector, bankers are confident that it would not. For instance, Head, Corporate Affairs, United Bank for Africa, noted that such insinuations were unfounded.

“There is no plan to sack any bank staff and anyone who gets sacked will be on the account of negligence or other issues and not due to the TSA implementation,”


The Director, Corporate Communications, CBN, Mr. Ibrahim Muazu, explained that the TSA was part of the national payment initiative, aimed at modernising the country’s payment system.

The CBN insisted that any agency that was fully or partially self-funding like teaching hospitals, medical centres, federal tertiary institutions and foreign missions must maintain in the CBN, sub-accounts linked to the TSA, and the accounting system would be configured to allow them access to the funds, subject to their approved budgets. “There is no going back on the policy and any instit u t i o n that did not comply will be sanctioned,” Muazu said.

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