Why Nigerian Banks Are Panicking Over Buhari’s Presidency
A report by BusinessDay newspaper indicates that
Nigerian lenders are in panic mode at the moment over
the pending enforcement of the Treasury Single Account
(TSA) of government by the incoming administration.
Their fear is due to the implementation of this model,
with also tight monetary stance of the Central Bank of
Nigeria (CBN), would put a squeeze on the banks.
“There is the fear of liquidity squeeze due to the likelihood of
unification of government accounts by the incoming Buhari
administration. The fear is borne out of the fact that with the
Monetary Policy Rate at 13%, Cash Reserve Ratio (CRR) at
20% and 75% for private and public sector deposits
respectively, its implementation would be tough for banks,”
says a senior industry player.
Also, returns of lenders in Nigeria, driven substantially by
net interest margins, would further be crimped by the TSA
This is because the single account, which is supposed to
unify and monitor incoming and outgoing government
transactions for transparency and accountability, will
deny the banks of over N60 billion funds belonging to
Ministries, Departments and Agencies (MDAs) currently
in the vaults of banks.
But, the publicised stance of Buhari’s administration on
corruption is causing panic in the lender community, as
there are concerns that its implementation may be on the
priority agenda of the incoming government.
The argument is further buttressed by the transparency
that the implementation would bring to bear in the
“In our opinion, the implementation of a Single Treasury
Account (STA) is expected to block revenue leakages within
the government parastatals as the Ministry of Finance will be
able to monitor the inflows and outflows, hence augment the
reduction in oil revenue due to falling oil prices,” says
Ayodeji Ebo, analyst with Afrinvest Securities limited.
A member of the Monetary Policy Committee (MPC),
Chibuke Uche, in his contribution to deliberations at the
meeting, said: “it has indeed become very clear that total
economic restructuring is an urgent imperative. Although the
falling oil price is making the fiscal space more complicated,
I believe that there is still room for improvement.
“One area that can be easily improved upon is the reduction
of wastages in government finances, which is as a result of
poor financial management. By far the greatest single
example of this, is the absence of the Treasury Single
The outgoing government didn’t succeed in enforcing the
policy which would have compelled MDAs to transfer the
multi-billion internally generated revenue into the
Treasury Single Account despite the directive by the
Accountant-General of the Federation. It is said that all
such monies be paid through electronic channels called
e-Collection, directly to the Consolidated Revenue Fund at
the CBN. The deadline had expired since February, 2015.
Informed industry sources say that leaders of the high
revenue yielding government establishments are
hindering government’ efforts towards single accounts
because of the benefit they make from such deposits.
Some banks are also not happy with the new
development because this channel provides them cheap
funds through the mopping up of dollars in circulation,
thereby putting pressure on the naira, which is now a
major challenge for the CBN.
“While the outgoing government has failed in its efforts to
help itself in plugging leakages in the system, especially in
the face of low oil incomes, the opportunity has provided
itself for Buhari to act fast, as soon as he assumes office
and save the situation that has degenerated,” says an
“There is no way Buhari’s government will not be hard on
the MDAs and banks which have been able to hold
government to ransome as they refused to implement a
policy that would have engendered confidence and
transparency in governenace,” a banker told BusinessDay
Culled from Naij.