Opinion: Effects of the Proposed Treasury Single Account

By Soko Directory Team / August 27, 2017




TSA refers to Treasury Single Account, a public accounting system using a single account, or a set of linked accounts by government to ensure all revenue receipts and payments are done through a Consolidated Revenue Account (CRA) at the Central Bank of Nigeria (CBN).

The public Finance Management Bill 2017 is seeking to consolidate government funds under one account. Under the regulations, the National Treasury and each County Treasury will establish a Treasury Single Account through which sub-accounts of government entities will be managed, effectively giving the government a clear picture of its consolidated cash position.

Treasury Single Account will enable the government to better plan its cash flows and possibly reduce borrowing through overdrafts and other short term treasury securities.

All national government revenues will be passed through the revenue collection account, credited to the exchequer account from which outflows will be managed. It will make the government better able to assess its financial position at all times through the account ledger. The government will also be able to generate financial statements from the account which will increase accountability in the public space.

Read: 

Liquidity environment

There is a risk that significant deposits will flow from the banking system to the Central Bank leading to tighter liquidity in the banking system. National Bank currently has the largest share of government/parastatals deposits at KES 54Bn as at FY2016.

This represents 56% of the bank’s deposit book. Of the KES 54Bn, KES 21Bn is payable after 90 days indicating that the funds are not immediately needed to meet government/parastatals’ expenses. KCB’s share of government deposits was at KES 40Bn according to the annual report as at 2016. This represents 15.4% of the banks deposit book. Of this KES 19.4 Bn of the deposits was due after 30 days. The existence of the term deposits indicate that there are some parastatals which have surplus cash that is not needed for some time.


Treasury Bills

On the other hand, the government borrows funds every week through treasury bills in order to meet various immediate obligations. Availing the surplus cash held in term deposits to the treasury would reduce the amounts borrowed at the Treasury bill auctions. . The government will also be able to avoid instances where government entities lock in funds in term deposits while still receiving budgetary allocations.

Government has been transferring all financial transactions of government ministries and entities to the Integrated Financial Management Information Systems (IFMIS). This process is substantively complete making it prime time to operationalize the TSA.

In January 2017, the Finance bill 2017 proposed that all government deposits should be placed in banks where the government has more than 20% ownership of the bank. The banks that fall under this category are currently, KCB, National Bank, Consolidated Bank, Development Bank and Post Office Savings Bank.

The bill was amended before being tabled in parliament to exclude that section. The bill however brought into question whether the TSA will be operated by the CBK or a commercial bank(s) on behalf of the CBK. In many Latin American countries, large publicly owned banks operate the TSA. In some countries, large banks undertake the daily debit and credit transactions and carry out daily sweeps into the Central Bank to a consolidated cash position.

In Nigeria, all revenue generating ministries were required to transfer 80% of their cash to the treasury single account with the central bank. We will be looking to see how the TSA is structured in Kenya.

In our view, the main effects we expect from the TSA are:

1. Less government borrowing– Better management of the government cash position will reduce unnecessary borrowing

2. Low-Stable interest rates– In the past we have seen the government borrow at very high rates through treasury bills when faced with liquidity constraints. Having a clear view of the cash balances and anticipated cash balances will enable the government to match its inflows and outflows adequately and manage its borrowing schedule in such a way that there will not be extreme spikes in interest rates

3. Shift in deposit balances from commercial banks to the TSA -The most adversely affected will be the banks which hold significant deposits from the government. These are KCB, Co-operative Bank and National Bank

4. If the TSA will be run by the CBK through the RTGS system, we expect higher cost of deposits for banks which have traditionally enjoyed low cost government deposits. On the other hand, if the TSA is run through government owned banks, these banks will enjoy low cost of deposits.


Analysis from Britam. Britam Asset Managers (Kenya) Ltd is a subsidiary company of Britam Holdings Ltd, which provides asset management and investment services to its customers through a wide range of investment products and services, such as: Unit Trust/Mutual Funds, Wealth Management, Property, and discretionary portfolio management. 



About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system. Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

View other posts by Soko Directory Team


More Articles From This Author







Other Related Articles








SOKO DIRECTORY & FINANCIAL GUIDE

ARCHIVES

2018
  • January 2018 (291)
  • February 2018 (220)
  • March 2018 (279)
  • April 2018 (226)
  • May 2018 (240)
  • June 2018 (137)
  • 2017
  • January 2017 (183)
  • February 2017 (195)
  • March 2017 (207)
  • April 2017 (104)
  • May 2017 (169)
  • June 2017 (206)
  • July 2017 (190)
  • August 2017 (196)
  • September 2017 (186)
  • October 2017 (236)
  • November 2017 (253)
  • December 2017 (266)
  • 2016
  • January 2016 (167)
  • February 2016 (165)
  • March 2016 (190)
  • April 2016 (143)
  • May 2016 (246)
  • June 2016 (183)
  • July 2016 (271)
  • August 2016 (250)
  • September 2016 (234)
  • October 2016 (191)
  • November 2016 (243)
  • December 2016 (154)
  • 2015
  • January 2015 (1)
  • February 2015 (4)
  • March 2015 (166)
  • April 2015 (109)
  • May 2015 (117)
  • June 2015 (121)
  • July 2015 (150)
  • August 2015 (157)
  • September 2015 (189)
  • October 2015 (171)
  • November 2015 (174)
  • December 2015 (208)
  • 2014
  • March 2014 (2)
  • 2013
  • March 2013 (10)
  • June 2013 (1)
  • 2012
  • March 2012 (7)
  • April 2012 (15)
  • May 2012 (1)
  • July 2012 (1)
  • August 2012 (4)
  • October 2012 (2)
  • November 2012 (2)
  • December 2012 (1)
  • 2011
    2010
    2009
    2008
    2007
    2006
    2005
    2004
    2003
    2002
    2001
    2000
    1999
    1998
    1997
    1996
    1995
    1994
    1993
    1992
    1991
    1990
    1989
    1988
    1987
    1986
    1985
    1984
    1983
    1982
    1981
    1980
    1979
    1978
    1977
    1976
    1975
    1974
    1973
    1972
    1971
    1970
    1969
    1968
    1967
    1966
    1965
    1964
    1963
    1962
    1961
    1960
    1959
    1958
    1957
    1956
    1955
    1954
    1953
    1952
    1951
    1950