The nation’s banks may lose about N2 trillion deposits to the Central Bank of Nigeria, CBN, with the implementation of the Treasury Single Account, TSA, as ordered last week by President Muhammadu Buhari. States are also gearing up to adopt the policy.
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The report on accounts of banks with CBN shows that as at beginning of this current quarter, banks’ total public sector deposits was N1.3 trillion but additional net flows from Federation Accounts Allocation Committee, FACC, as at end of last month (about N240 billion) as well as expected inflows by end of this month may push the figure close to N2.2 trillion by the time the pull out begins next month.
According to the directive from the Presidency, the implementation of the TSA by all ministries, departments and agencies (MDAs) is to enable compliance of MDAs with the provisions of the constitution. This is also in line with the Presidency’s directives to the National Economic Council, NEC, to ensure full compliance of MDAs to relevant laws on accounting, allocation and disbursement of public funds.
Bankers had pressurized the former government of Goodluck Jonathan, which had initiated the policy in December 2014, to soft pedal on the implementation which was originally scheduled for February 2015, on the reasons of a likely negative impact on the economy.
Last weekend, bank treasurers told Vanguard that the implementation would adversely affect liquidity in the banking system and end up putting pressure on interest rates and availability of credit to the economy.
In a statement last weekend, Afrinvest Group, a Lagos-based financial investment house, said: “Whilst the directive issued came as the first official statement by the Presidency on the TSA, the Nigerian National Petroleum Corporation, NNPC, had earlier began withdrawing its funds from banks for retirement into CBN.
“This had an impact on liquidity level in the banking system, resulting in a surge in money market rates during the period as banks scrambled for funds to cover their liquidity positions.
“With the TSA implementation now extended to all federal MDAs, the Nigerian banking industry, on an aggregate basis, would be affected in terms of deposits and funding cost structure.”
In relation to this FBN Capital, an investment arm of FirstBank of Nigeria Plc, stated in its money market reports last weekend that the NNPC withdrew about N400 billion from the banks last month pushing Open Buy Back, OBB, and overnight interest rates to a record high of 50 per cent. It, however, stated that this pressure was corrected when FACC inflow came to the banks within the same period.
In the implementation of the TSA there will be no FACC inflow to correct or compensate for the outflows.
