The Treasury Single Account – A tool for Blocking Revenue Leakages in Nigeria.

Vahyala Kwaga

To what extent can the TSA enhance Nigeria’s Public Financial Management in Nigeria?

The adoption of the Treasury Single Account (TSA) by the national and some subnational governments in Nigeria, as part of public financial management (PFM) reform, can assist in improving savings and budgeting, reduce potential for misallocation or theft of resources via unclear cash management practices and promote transparency and accountability. The need to grow Internally Generated Revenue (IGR), improve public savings, is nontrivial, as every naira is crucial. About 85 million Nigerians do not have access to electricity, among other services. The urgency to plug revenue leakages creates a demand for efficient public cash management and comprehensive implementation of TSA practices. Several definitions of a TSA exist, but the central thread is that a single account, protocol or location for collection of government receipts, serves for better monitoring and management of funds and can improve fiscal space for all levels of government.

Why should Nigeria prioritise Fiscal Reforms and TSA?

Recently, the nation’s House of Representatives, claimed the federal government may have lost as much as $30 billion dollars in annual federation tax revenue between 2015 and 2019. A year earlier, the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) disclosed that over N1.3 trillion naira was being lost annually to a lack of effective monitoring of the solid minerals sector. The above losses could have been identified, via calculated cash management practices as the importance of cash management (a practice flowing from the use of a TSA) in terms of broader savings and blocking of leakages are well documented. The latter highlights the management function having the potential to unlock benefits of using a TSA and underscores the importance of leadership (or ‘Political Will’); a key node within the function of management. This is because TSA protocols are only as effective as their enforcement: where a daily cash call or remittance is unenforced, heads of revenue generating agencies have an incentive to underreport or simply not comply. However, the reasons for underreporting or non-compliance in turn depend on the institutional environment and actor incentives.

A more in-depth look at PFM Paradigms at the State Level; A case study of Kaduna, Kano and Niger States

Though Nigeria operates a federal system, there is much to be desired regarding the ‘fiscal’ arrangement, as state governments often manage their economies with heavy dependence on revenue from the federation account. Eventually, the World Bank funded a $1.5 billion dollar State Fiscal Transparency, Accountability and Sustainability (SFTAS) Program-for-Results; a renewed effort by the Federal Government to nudge States to adopt a common set of fiscal behaviourS aimed at attaining fiscal sustainability. The programme combines actions from the Fiscal Sustainability Plan (FSP) and the Open Government Partnership (OGP) agenda to incentivise PFM reform actions (called Disbursement Linked Results). One of the key reforms under the program required States to institute a functional TSA, covering a minimum of 80% of State government finances by 2021 and the account should be premised on a formally approved cash management strategy.

At the level of sub-national implementation of the TSA, the author has gathered that states generally tend to see the TSA as a mere monitoring tool, as opposed to a set of accounting, managerial and financial protocols. From the states under review, only Kaduna (the sole state in the federation) has met SFTAS requirements for 2 years in a row. In fact, not only does Kaduna have an operational TSA (the latter, a build up from years of tax reform within the state) it has a functional computer dashboard, called ‘Kaduna State Government Trackpay’, that shows the state’s fiscal balances in real time. For Kano, no Cash Management Strategy has been published and it has no computer dashboard but it does have a relatively functional TSA with First City Monument Bank. Niger state has no comprehensive Cash Management Strategy and its TSA covers only 9% of total government finances. The Niger state government operates multiple accounts but has an account into which only IGR is remitted (their dashboard only monitors IGR). The state also has a ‘Statutory account’ with Zenith Bank, into which FAAC and VAT are pooled. From the above data, the state with the best performance is Kaduna. However, the more interesting question is why this state of affairs exists (and persists) among the states. Could this be tied to leadership or are there more factors at play?

A glimpse of what is possible if the TSA is fully functional at the state level

A fully functional TSA (as envisioned by SFTAS) exposes the amount of revenue a state has, meaning state governors will be under more pressure from citizens and civil society, to carry out citizen-focused governance as the ‘true’ revenue position of government would be known. In addition, lifting this veil means state executives may have less discretion in sourcing for revenue and short term finance, hitherto bordering on government and commercial bank relationships that may be mutually beneficial but detrimental to government transparency and accountability.

What can the State Governments do better?

State Governors must prioritise the implementation and enforcement of Cash Management Frameworks, in the format suggested by the SFTAS Program, for all the MDAs within the state.

State Governors should insist on the full implementation of TSA as a management and administrative practice, across all MDAs, as this has the potential to free up idle funds that can be used by the state.

Program Implementation bodies (in particular SFTAS or the Nigerian Governors Forum and CSOs in the transparency space) should collaborate with compliant state revenue generating MDAs and State executives, to create more TSA awareness and develop protocols that allow for freer and more timely outflow of monies to the MDAs.

The various State Houses of Assembly should not be left out of the discussion, as they have the mandate to legislate for the state. Where they can be engaged on the benefits of a TSA (and the broader aim of passing public finance legislation, such as a Fiscal Responsibility Law or amending the laws where they already exist), the uptake of the latter will stand a much better chance of being mainstreamed.

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