Friday, 6 January 2017

How TSA Policy ruined businesses in 2016—Finance Expert + Why Govt. must relax 60% of the policy in 2017


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Lukeman Oyewole Lawal, President, Ultimate Youth Dream Initiative

Treasury Single Account (TSA) a financial policy introduced by the Federal Government of Nigeria in 2012 was brought to perfect use in 2015 after the swearing in of the new anti-corruption regime of President Muhammadu Buhari. One of the cardinal points of the policy is to consolidate all financial inflows from the country’s ministries, departments and agencies (MDAs) by way of deposit into commercial banks, traceable into a single account (Consolidate Revenue Account) at the Central Bank of Nigeria (CBN) Since the adoption of the policy by Mr. Buhari, it has among many other things curb corruption in public organizations. For instance, TSA helps check incidence of multiple accounts operated by government MDAs. It ensure adequate monitoring of government revenue, receipts and expenditures  and block leakages  as no MDA is allowed to keep any operational account.  Under the TSA policy, Deposit Money Banks (DMB) using public sector funds deposited by MDAs to make free profits are forbidden.
However, looking at the incidence of bureaucratic delays associated with disposable revenues by the CBN to the MDAs and the several impacts of the policy in year 2016, LUKEMAN OYEWOLE LAWAL, a financial expert and President of the Ultimate Youth Dream Initiative, a socio-economic analyst and policy assessment organization reviewed the TSA policy on the last day of December, 2016 (December 31st) and labeled the policy as the reason for many job losses, suicide killings and organizational bankruptcy that characterized year 2016.

 Mr. Lookman Oyewole Lawal who is equally a Lagos State House of Assembly Aspirant in Surulere Constituency 1 of Lagos (South Western Nigeria) during the 2015 election believes that the policy did more harm to the Nigerian system than good. Mr. Lawal equally took a swipe at President Muhammad Buhari’s 2017 budget labeling it a budget with no affection for ‘the Household’. He spoke to Asabeafrika inside his Lagos home on the last day of year 2016. His analysis is the TSA is quire fiery and revealing. You have not read this anywhere before.  Enjoy the excerpts. 
The GDA meets Mr. Lukeman Oyewole Lawal for the December 31st Encounter
 
Your organization, Ultimate Youth Dream Initiative has always given a kind of audit and policy review on government policies at states and national level in the last 5 years. Sir, today is December 31st and looking at 2016, how would you describe the year in terms of government’s policies as it reflects on the ordinary citizen?
Thank you very much. Year 2016 has come and it is winding up now. I must say it has been a very tough, a very difficult year, and I will say that with every sense of responsibility in me. If anyone is to evaluate any government or any polity, there are certain indicators that easily come to mind. Number one is the rate of unemployment. If we look back at the year 2015 when this new government came on board, unemployment and underemployment was put at 22.4 million. As we speak today, it is on the verge of 30 million and that is telling us that over 6 million jobs have been lost between May 29, 2015 and December 31st, 2016. In the course of this year alone, about 5.4 to 5.6 million jobs, I mean full time jobs, have been lost. We can make up our minds on that. Another indicator anyone will look at is the poverty rate. Today, the United Nations’ World Economic Report says that over 60% of our population is living below the poverty line. That is about a hundred and twenty million people, they also scored us on employment as well. Over 64% of active youth population is in the unemployment circle. Another indicator to look at is the ease of doing business; on that index, we are 169 out of 189. Last year, we were 170, so, we have moved a step ahead. But in critical terms, I don’t see any improvement across different sectors, industries like manufacturing, trading and service rendering. This is a year (2016) when industrial players have lost over 1.4 trillion to foreign exchange fluctuations and it is so painful. We will also look at other areas such as members of the house-hold. It is very painful that in our clime, we do not consider members of the household or the average household when we make policy formulations, when we make programs and when we conceive projects.
Lukeman Oyewole Lawal, very angry with the result of TSA on ordinary Nigerians
All over the world, it is a tripod of the government, the firms and the household. At every point in time, people in government must enact laws because the laws are the fundamental instrumentality of governance, you must enact laws that would impact positively on the members of the household. Policy makers as well, must at every point in time, formulate policies, evolve programs and projects that will impact positively on members of the household because all over the world like I said, where companies go ahead to produce, it is members of the household that will buy. We must ensure that income is put in the hands of members of the household. The government is at the driver’s seat to ensure at every point in time that members of the household are not impoverished.  The disposable income as we are talking today is grossly eroded. The purchasing power is almost nil. Then, we now talk about the Treasury Single Account; I am very particular about that policy.
GDA meets Lukeman Oyewole Lawal
Before we go to the issue of the TSA, you just mentioned the tripod that is very germane to policy making in every sane society which is the Government, the Firms and the Household. Do you think President Muhammadu Buhari’s government is sensitive to these three especially the last leg, Household?
I must be very sincere, we seem to have a huge disconnect with the people at the leadership echelon. We don’t have the simple idea of what good governance should be about. If you are running my affairs in trust, I have given you the mandate to run my affairs in trust, you must hundred percent ensure that my socio-economic well-being is guaranteed.
Ex-President Goodluck Jonathan....'Signed TSA Policy into law'
You must ensure as enshrined in section 14 (2B) of our constitution; the primary purpose of government is security and welfare of the people; and so, everything that concerns socio-economic well being is the business of government, weather it is food, weather it is shelter, weather it is education, weather it is housing, weather it is transport, weather it is employment. All spheres of human existence are the business of the government. And if we are in a recession, look, I don’t want to go back to the reasons why we are here. But, what are we doing to get out of where we are? How much are we sensitive to the plight of those people that have lost those jobs? As I am talking to you now, in this country, everybody that is in full time employment has nothing less than 3 to 5 dependants that they will remit money to, weather old or younger dependents, directly and indirectly.
President Muhammad Buhari....Activated the TSA policy fully under his reign
That is what is obtainable in this clime. And so, if we have taken jobs off additional 5.6 to 6 million people in a year, multiply that by three and you will discover that additional 18 million to 20 million people are going to bed hungry. Now, we hear of people committing suicides because of six thousand Naira, not to talk of the various state governments that owe salaries. So, for me, we must put on our thinking caps, we have heard the new budget of over Seven trillion Naira to be spent. We have applauded it but as we speak, I cannot see the right mechanism or structures in place that can gratify somebody like me, a chartered accountant, a governance and social researcher to go to bed and say ‘yes, I am expecting something positive in 2017’.
Mr. Lawal explaining a point to the GDA
Before we go back to the positivism of 2017, you will agree with me that one of the hallmarks of this government in 2016 is the signing of the Treasury Singular Account (TSA) into action which culminated in the shortage of corruptive acts in public sector. How would you applaud TSA as a Social Researcher?
Thank you very much. The Treasury Single Account is not a new thing. It is not something that other countries have not adopted before. But when we are trying to adopt new policies, it is very good for us to do a pre-impact-assessment.
(Cuts in)What do you mean by Pre-Impact Assessment?
Lukeman Oyewole Lawal to Asabearika....'I beg government to stop adopting policies that impoverishes Nigerians'
Thank you very much; it is very painful when we adopt policies that would impoverish majority of members of the household. How do I mean? The TSA policy is well intended; it is supposed to unify the structure of government’s account balances, of government’s collections and government’s remittances. We know over time how multiplicities of accounts were run. How donor funds were diverted and how some MDAs would have surplus and others would be borrowing from banks to run their activities. So, it is a very good intended policy. However, where I quarrel with its implementation is when it is full blown hundred percent. And I will tell you, why, sir.
Tell me
Lukeman Oyewole Lawal to Asabeafrika....'This government must relax TSA in 2017'
I will give you a simple example. If you diagnose a patient in the hospital and the patient is supposed to go for a surgery, he or she is in bad condition. International best practices are that you will check the blood pressure to know whether that patient is feat for that surgery. You will check the blood sugar; you will check the PCV level. These are basic checks that will not let you lose that patient on the theater table. As much as you love the patient and you are trying to salvage his or her life, you won’t rush him or her into the theater.
Lukeman Oyewole Lawal to Asabeafrika....'Taking off TSA 100% from banks is like killing those banks'
Taking TSAs off the banks hundred percent, off the MDAs hundred percent is like rushing a patient into the theater without checking the vitals. And that is why the banking sector has suffered so many shocks, so much job losses. That is why industrial and commercial activities have been drastically reduced. That is some of the reasons why the GDP growth rate has contracted in the negative. We have projected 2.6% for next year; I don’t see how it is going to happen. We projected 3.6% for this year, it didn’t happen. We suffered negative GDP growth rate across first, second and third quarters. By the time the fourth quarter will come out again, you will see that it will be negative. And that is why as good the intention of the TSA policy was at the time, it should have been done in phases.
Lukeman Oyewole Lawal to Asabeafrika....'Any Government Policy that does not take the interest of the Household into consideration is a useless policy'
(Cuts in) What do you mean by phases? 
What was obtainable before now was that all capital votes or funds were domiciled at the Central Bank of Nigeria. It was only the overheads that were domiciled with the commercial banks, and also, what we call dedicated revenues. Now, dedicated revenues are obtained with MDAs that renders social services like higher institutions (Universities), like public hospitals and other social service institutions. Now, when they render services, they collect funds and they use the same funds to run their systems. It is a revolving fund but it is usually captured in the budget. It is always captured in the budget and they use it to run their system on a daily basis. You will recall that one of the germane demands of ASU at the last warning strike was that the government should exclude their endowment funds from TSA. Because the endowment funds are funds that are donated for certain projects by individuals, by philanthropists or even alumnus.
Lukeman Oyewole Lawal....'Contractors are hungry, FRSC are threatening to start taking bribes because of TSA'
So, they are now saying ‘instead of rendering us totally impotent financially, let us be running with our endowment funds’ because the bureaucracy surrounding the release of funds is quite crazy. Before you get payment from the inception, the turnaround time of payment from where the requisition is raised to when the cheques are ready, takes forever. We are not ripe to implement TSA hundred percent because a lot of sectors have suffered. The contractors are suffering, the artisans are suffering, the market women are suffering and the traders are suffering.  Those institutions are everywhere. In every state, we have over 534 federal institutions; I mean Ministries, Departments and Agencies. About 70% of them are revenue generating in nature and so, they all have their dedicated revenue accounts. Their accounting officers write cheques and when they collect funds, they pay for services, they pay for supplies, the contractors get paid, the tillers get paid, the painters get paid, the furniture supplier gets paid and all areas of service rendering. 
Lukeman Oyewole Lawal to Asabeafrika....'The day-to-day running of MDAs cannot survive with the bureaucratic culture of Federal Pay officers'
They are involved in the procurement system employed at those levels. So, by the time you make it a central payment system, by the time all the funds are hundred percent domiciled at the CBN, then, everybody will go to Abuja to process their payments, wait for federal pay officers to bring their cheques and they just keep waiting forever. On a yearly basis, our debt services fees is still in the region of 35% of our revenue to be earned. It is crazy, over 1.3 trillion on debt servicing.
Are you now saying President Buhari was not properly advised before going for a hundred percent implementation of the TSA policy or we could probably say Mr. President is a victim of bad advisers?
Lukeman Oyewole Lawal....'Our People need a culture of impact assessment before unleashing harsh policies on the masses
I will be very honest with you; we are a people that have not embraced the culture of impact assessment. It is pertinent across government echelons, that the moment you are trying a new policy, a new program, a new project, it is usually good to do a pre-impact assessment. Let’s say your pre-impact assessment gives you positive feed backs, by the time you implement across the first and second quarter and you can see the damages it is doing, it is responsible for you to relax such a policy. About 5 banks combined have posted about 80% profit reduction in the course of this year. I mean, 80%; and one of the bank MDs, I don’t want to mention his name, said, about three or four weeks ago when he was at a forum and somebody asked ‘why are you not giving long term loan?’ He said ‘You have taken away the TSAs. If you have taken away the TSAs from us, we don’t have such funds to give as long time loans’. Any economy that does not support access to credit is doomed to fail. Whatever fiscal policy frame work and monetary policy frame work that we are formulating that will not increase access to credit, that will not increase ease of doing business, that will not reduce the unemployment rate; I am telling you, honestly, sir, that we are not doing anything positive.
Lukman Oyewole Lawal to Asabeafrika....'TSA has taken food off our table'
What is the way out of this economic logjam?
Our proposal to the present government is that having identified all the positives of the Treasury Single Account (TSA), it is a good one. However, we must not be oblivious of the negative effects that have taken jobs off 5.6 million Nigerians in the year 2016; apart from the foreign exchange difficulties that we have had. Apart from the drop in the crude oil price per barrel, apart from the restiveness in the Niger-Delta that have reduced our production output, I am telling us with every sense of responsibility today, that the full implementation of the Treasury Single Account has impeded economic growth drastically this year (2016), it has taken food off our tables, it has impoverished hundreds of millions of our people. We must relax it. The dedicated revenues of these MDAs would be spent anyway. They would still get the funds and they will spend them but the delay, the number of months that they will be waiting to get these cheques; you can imagine the number of people that would be hungry, imagine the number of jobs that would be lost and just imagine the number of businesses that will be closing down every day. The truth of the matter is that businesses keep on closing down. If we relax TSA by 60% as we are entering 2017, you will all be shocked at the improvement in economic activities that we would witness as we begin the New Year.
Are you sure?
Lukeman Oyewole Lawal with Gbenga Dan Asabe
Absolutely. If we relax TSA the economic livelihood of our people will improve. What I mean is that, instead of domiciling hundred percent at CBN, let us domicile 60% of funds that are dedicated revenue at those agencies. Let UNILAG (University of Lagos) spend 60% of what it is collecting. Let LUTH (Lagos State University Teaching Hospital) spend 60% of what they are collecting as they were spending it. For instance, recently, FRSC (Federal Road Safety Commission) were threatening that they will begin to collect bribes because salaries were not paid.
You mean the Federal Road Safety Commission?
Yes. In the course of this same year (2016), some of the projections for TSA were that we will borrow less. Have we borrowed less? No. our borrowings have increased. And our deficit financing for next year (2017) is even increasing to about 2.7 trillion from about 2.2 trillion. So, we are inflicting ourselves with huge problem by doing hard-line policies, by not doing periodic impact assessment, by not relaxing policies that are injurious to members of the household. It is a shame, that in this clime, we would open our eyes and watch businesses fold up. The banks, they cried, they said ‘look, by the time you take off these funds, we are going to have liquidity problems’. The Nigerian economy is largely public sector driven. We have reduced cash reserve ratio three times, no impact because the huge of the funds were coming from the public sector not the private sector. Even though cash reserve ratio has been reduced to 25% or 20% we cannot see the positive impact. No businesses are opening, no new businesses are opening. Businesses keep folding up. Contractors are groaning every day. They are owed by all these MDAs, their cheques are not coming in. So, any system that is taking jobs off people, that is not contributing positively to the circular flow of income, between the government, between the firms and the household, must be abated, must be reversed, must be relaxed as a matter of urgency. Today, you are there, you owe us, we cannot continue to have suicides every week. It is painful.
Let me get you clearer now, are you saying TSA is a doom economic policy. I want you to be frank?
I will be very honest with you, to the extent where the government knows how much it is worth on a daily basis as retained earnings, TSA has given us the opportunity to know that ‘oh, we made N2.2 trillion Naira today. Tomorrow after all payment, we have N2.1 trillion, next tomorrow N3.2 trillion has come in, we have this amount. To the extent where agencies that were diverting government funds, none of that is happening again, it is a good policy. To the extent where agencies or accounting officers were trading with government funds and now stopped, it is a good policy. To the point where even banks themselves were not remitting government funds as at when due, and that has equally stopped, it is a good policy. However, I will give you an instance,
Lukeman Oyewole Lawal
I was at a conference on the 3rd of December 2015 organized by World Bank, International Federation of Accountants, Association of National Accountants of Nigeria, the Accountant General’s office and the representative of the minister of finance was there. The seminar was organized to talk about ‘Transparency and accountability in governance; the role of the Treasury Single Account’. There were four professors that gave paper presentations and two others were discussants and the white guy from IFAC (International Federation of Accountants) another white woman from World Bank and we all agreed, that as much as there are positives and advantages, we must not be weary of the disadvantages because it could stifle economic growth and that is what I have seen in the course of 2016. GDP growth in the negative, across the first quarter, across the second quarter, across the third quarter is largely caused by the full implementation of the Treasury Single Account. I say this with every sense of responsibility in me because if you leave those MDAs with their dedicated revenues to pay for services rendered, to pay for supplies, we will be moving well in the economy. A lot of banks would have funds to give contractors, contractors will take funds, render services, ninety days overdraft, pay interest to the bank, pay their staff, everybody is happy. That is how to run a good economy. We must relax TSA by 60% for all financial autonomy MDAs.  For all Ministries, Departments and Agencies like universities, like tertiary institutions and other social services rendering federal agencies. Let them have 60% of their funds spent by them as they were spending them before. We can improve financial control through periodic checks. We can improve financial control through mystery check such that in the course of the year, if there are agencies that are not complying with laid down regulations, we could sanction them.
What is a mystery check?
LOL to Asabeafrika....'There are many other ways to check the excesses of MDAs than stifling funds with TSA
The mystery check would come from the ministry of finance. They will send their staff or their agent to see how the financial system of the MDA is being operated and responding to lay down rules without their prior notice. That is a mystery check, they will not be informed that they are coming and nobody would be aware of the inspection. Or they could just send in a consultant to ask questions; the person will tell them ‘Oh, I am running a research, I have letter of interest to ask questions on how you make your payments? How do you nominate your contractors?’ By the time that person gathers the information, he will be able to give some feed backs to say ‘Yes, this people are complying with laid down control procedures or this people are not complying with laid down control procedures’. Instead of having fiat announcement restricting growth, restricting economic activities, promoting job losses, promoting negative GDP growth rate and putting food off the table of millions of our people. For every fund that comes from the government to the firms, automatically, the members of the household would get salaries, would get payment. The pepper sellers will get out of it, the meat sellers will get out of it, the landlords will get out of it, and the transporters will get out of it, everybody because it is a circular flow. But any policy that impedes the smooth running of the circular flow of income must be done away with. Our payment cycle, our payment turn-around time, the duration is too long. We don’t run automated payment systems here. There is no system in place to pay 534 agencies in one fell swoop. It is not possible.
(Watch for more facts and solutions in our Exclusive Video of this explosive interview on Gbenga Dan Asabe YouTube Channel coming soon. Go and subscribe and Watch as it debuts)




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