Why Nigerian Banks Are Panicking Over Buhari’s Presidency

Nigerian banks

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

implementation.

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

incoming government.

“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

Account (TSA)”.

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

analyst.

“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

last night.

Culled from Naij.

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