Introduction
The Nigerian government has decided to contract banking procedures which are an important feature for well-organized management and control of the government’s financial resources. To this end, the need to design banking procedures that minimize the cost of ‘government borrowing’ and maximize the opportunity cost of cash resources has become paramount to ensure that all cash received is available for timely settlement of government spending and payments. Prior to TSA, the Nigerian government operated a disjointed system of receipts and payments which, naturally, would make it extremely difficult to determine a combined position of the nation’s financial resources. As a result of this, the government lacks central financial control of its financial resources and lacks the ability to run its budget without going into debt, even as the government’s huge financial resources lie dormant in the spending accounts of the Ministries, Departments and Agencies (MDA) in several money deposit banks.
The TSA is an indispensable tool for consolidating and managing government cash resources to minimize borrowing costs associated with fragmented government banking procedures. The CUT institution is currently the preferred option on the global public financial management reform agenda.
TSA is an amalgamation structure of government bank accounts that ensures a consolidated view of government cash resources through a set of principles. The principles of ‘cash unit’ and ‘treasury unit’ are the most basic foundation that a good TSA must have. TSA is a set of linked bank accounts through which all government payment and receipt transactions are made, allowing for complete and timely information on government cash resources. The Government Integrated Financial Management Information System (GIFMIS) is expected to provide a daily balance update in real time. A government unable to effectively control its cash resources will face the multiple problems of its institutional deficiencies.
TSA Benefits
The main objective of operating a CUT is monetary and budgetary and this is to ensure efficient and effective collection, consolidation and control of government cash resources. Consolidation of cash resources through a TSA arrangement enables government cash management by eliminating unnecessary borrowing costs. In the presence of TSA, idle cash resources are easily added and used to benefit the development objectives of the Government. In addition to the monetary and budgetary management benefits of the TSA, there are other goals for establishing the TSA including:
1. Minimize operating costs during budget execution:
has. especially controlling the delay in the sending of all government revenues by the collecting agents
b. make timely payments of government expenses
2. Facilitate reconciliation of government financial data and records
3. Efficient control and monitoring of government funds allocated to various MDAs
4. Provide superior coordination and implementation of government monetary policy
Because the Central Bank is the government banker, custody of the CUT must be in the hands of the Central Bank. With regards especially to revenue collection, the government banking procedures may consist of several bank accounts that can be held at commercial banks, but the cash balances in all such government accounts must be settled daily and transferred to the CUT, which is the main treasury account at the Central Bank. Locating the CUT in the Central Bank offers advantages such as:
1. With the Central Bank acting as the clearing house for government operations, the separate obligations and responsibilities of all participating banks (Central Bank of Nigeria and various commercial banks) serve as clear policies for banking procedures.
2. Limiting exposure to government credit risk and security of government cash deposits
3. Government liquidity is managed efficiently through the central bank’s coordination of the government’s cash profile together with the governments’ debt obligations.
4. Government banking procedures become faster and more profitable
Characteristics of a well-structured CST
Draining excess cash liquidity from Commercial Banks through open market operations to prevent reckless credit advancement by Commercial Banks imposes costs on the Central Bank. To prevent this and various other problems, a good CST should have the following characteristics:
1. A unified structure for government banking procedures that improves the government’s ability to monitor cash flows (in and out of the main TSA and sub-TSA)
2. An electronic banking platform that ensures real-time fungibility of all cash, regardless of end use, by distinguishing individual cash transactions for control and reporting purposes, but allows interchangeability with other funds within the same through the accounting system, thus creating a cash management system along with transaction level control
3. Consolidation of government cash resources becomes comprehensive, encompassing all government cash
4. The access and operation of the CUT depend mainly on the institutional structures and payment settlement systems
Conclution
Should there be a need to involve commercial banks in the TSA operation in Nigeria, the Central Bank of Nigeria (CBN) which plays the lead role while maintaining the TSA should ensure that government retail banking transactions are conducted in a manner effectively and efficiently by commercial banks, which must in turn ensure that all federal government entities (MDA) and their transactions are well captured. Autonomous government entities, social security funds, trusts, extra-budgetary funds, loans from donor agencies, and multilateral organizations must also be included in the TSA. It is important to extend TSA operations to other levels of government (state and local) through the use of sub-TSA and, where this is not possible, each state or local government should be required to institute TSA at its own level. . of government
