Comply or face sanction –CBN insists
Yesterday, the new economic policy on warehousing of government revenues only in the Central Bank of Nigeria (CBN) took effect.
The commercial banks are jittery over the development. There are also fears that the policy is aimed at curbing corruption might negatively affect bank workers who may lose their jobs.
As bankers fear for job loses, some Nigerians have even read meanings of bias in the matter as they spoke to Abuja Metro.
When the banks limp, the spiral effect is that most other sectors of the economy would suffer seriously
A senior staff of the Zenith Bank said: The truth is that most of the huge deposits we have come from the governments.
So the implication of Treasury Single Account (TSA) directive now is that we won’t post the kind of profit we usually do and a city like Abuja is not a retail market like Lagos so we can’t easily generate risk assets or loans for industries like the Lagos market does. Definitely, the end result for banks to remain in business and not operate at loss will be to reduce overhead.
But in actual sense we will be forced to do the real banking now which is taking from the surplus to meet the deficit in the economy by giving out more loans now and growing businesses because that is where we can make income since the demand deposit is shrinking which is what we usually trade with.
The impact on the economy is that we will start the real banking now as civil servants will no longer divert and hide government money in banks as every money leaving the CBN back to the commercial banks will be accounted for. Banks on the other hand will have to look into all sectors try and bank everyone, come up with retail products, lend more, as that’s where we can make income. But some banks will have to lay off staff to reduce overhead.
Heritage Bank senior staff: The TSA is a unified structure of government bank accounts in CBN. It is a bank account through which the government transacts all its receipts and payments and gets a consolidated view of its financial position at any given time.
This policy will obviously affect the flow of liquidity in the banking system. This is because once the banks collect government’s fund, it will be sent directly to the TSA. The free fund some banks used to enjoy will no longer be there. Also the impact on liquidity level in the banking system as a result of the TSA has caused a surge in money market rates as banks scramble for funds to cover their liquidity positions.
Implementation of the TSA policy will have adverse effect on the full year results of banks this year, which automatically will be unpleasant for banks as this will translate to job cuts.
The combination of the TSA and Cash Reserve Ratio (CRR) would result to income reduction, which would put significant pressure on banks’ profits, as one of the options to maintain profitability would be through cost-cutting, including staff rationalization.
Assuming you put N100m in your account in the bank, CBN policy on CRR states that N31m of the N100m will be kept in CBN. What this means is that the bank only has N69m out of your money to do business with. So with TSA and CRR, there is little fund left for banks.
If there is no money, there won’t be much liquidity and if there is not much liquidity, banks will have to cut cost and the only cost banks like cutting is staff cost. And when there is cut in staff cost, it means reducing staff strength.
With this TSA and CRR, banks have increased targets. If you increase target when the economy is liquid then no problem. But if you increase target when the economy is not liquid, where will we get the deposits from?
I am a senior manager in public sector and my target is N6b. A manager target in a branch can range from N2b to N5b depending on location of branch.
Senior UBA staff
I just moved jobs and my target is N3b. I was counting on moving my deposits from an MDA stuck in my former bank as a result of dissolved boards to stabilize in my new bank. However, I was reduced to tears when the accounts department informed me that these deposits I was counting on for career growth will move to CBN on or before September 14.
The industry is in panic. People are afraid of job loses as majority of bank deposits is government fund. Lending would suffer setback as private sector fund is not long-term liabilities for banks for onward lending. They will mop up about N600b from commercial banks.
No doubt the TSA will reduce corruption, which is the main aim of this present government but it will generate a lot more problems for the economy, the nation and the common man.
TSA has always been in practice for revenue generating ministries, department and agencies (MDAs) and parastatal but now with a circular from accountant generals office to move all government funds to CBN Garki, we project that another sumani like in 2009 will soon happen again in the banking sector.
The economy relies heavily on government funds especially in Abuja where we do not have the major private sector headquarters. Government will automatically have slower turn around time in disbursing funds to contractors and all.
Aso Savings staff
My view is that it will automatically kick start economic activities by minimizing domestic debt as first impact. Contractors bear the brunt of domestic debts and they are also bank customers.
Therefore instead of paying huge BD (a slang used in the sector), that is the interest on deposit returned to directors for keeping the money. It is interest markup to civil servants by bankers instead of them chase contractors for deposits. TSA is favourable to marketers for equal competition and curbs hike in interest rates.
This is bigger than arresting all politicians as per impact on anti corruption, it is a plus for this government.
You know directors make their allies grow in banking by sabotaging economy thereby producing half-baked management in banks.
The TSA is big issue for corporate governance. Redistribution of wealth will also be in the increase.
When a director is forced to make payments on time to contractors, contractors in turn will have purchasing power to inject into economy. That would be quite unlike now when only payments to big men are made and the rest will be reinvested in money market illegally via banks.
Back to interest rate…
When the money market does not get such artificial patronage, interests will fall and SMEs can borrow more profitably. What obtains now is that government buys its money via Treasury Bills. But because these directors won’t let go of the benefits from hoarding government funds in banks, the impact is continued rise in cost of fund.
Finally dollar trade will reduce because these huge BDs are always paid in dollars.
If this stops, dollar will reduce if not eliminate artificial appreciation over naira. It is a good critical move against corruption.
It is not bad at all for the banks because banks is now governed by half baked managers who rose via this anti economy system they can’t even understand the impacts. So TSA is a welcome development for some of us in the sector.
It’s anti-South economy -HURIWA
A Non-governmental organisation – Human Writers Association ha a different view of the policy and says it is targeted at the part of the nation – the South.
HURIWA alleged that behind the facade of the need to instill transparency and accountability as claimed by the president for forcefully enforcing the single accounts policy for all federal agencies, “lays well plotted landmines aimed at crippling the banking sector because of perceived dominance of investors from southern Nigeria in the ownership hierarchy.
Besides, HURIWA cautioned against hasty implementation of the TSA directive by federal agencies because of the inevitable mass retrenchment of bank workers that would follow the pull out of huge public fund in most of the commercial banks for transfer to the Central Bank of Nigeria. HURIWA said unemployment that will soon sweep across the banking horizon has no regional immunity as every family would be affected thereby rubbishing the real evil intentions, which actually guided the TSA policy in the first instance. “This policy is like throwing a stone in a market place without knowing whether it will actually harm the mother of the stone thrower.”
HURIWA has accused the Arewa Consultative Forum and an erstwhile Central Bank chief now a traditional ruler in a prominent northern Emirate for plotting to undermine the economy by successfully convincing President Muhammadu Buhari to flow along with their plot by introducing single accounts for all federal agencies to be domiciled in the CBN with tendencies to precipitate the collapse of the banks and weakening the alleged lopsided ownership of the banking institutions by southerners.
HURIWA, in a statement by the National Coordinator Comrade Emmanuel Onwubiko and the National Media affairs Director, Miss Zainab Yusuf said it has it on good authority that “this current irrational and impulsive policy of single account formed a fulcrum of the economic blueprints allegedly handed over to the new president on assumption of office by some regional hawks from the Northern Nigerian based Arewa Consultative forum who now has its erstwhile General Secretary Colonel Hamid Ali (rtd) as the Comptroller-General of Nigeria Customs Service.”
Fearing that this single account policy has started yielding it’s downsides by way of mass retrenchment of bankers by commercial banks, the Rights group has called for a review of the policy to forestall the eventual compounding of the dire economic hardship afflicting millions of Nigerian households. Any government policy that encourages youth unemployment must be discarded because it is inherently unconstitutional and illegal for government to create joblessness rather than gainful jobs.
“The president must be cautioned to stop the implementation of a hasty policy designed only for regional vendetta and targeted at economically weakening some investors only because they come from the southern part of Nigeria and by so doing exposing the Nigerian economy to large scale unemployment and job cuts which will inevitably affect every home because virtually every family has someone who works in the bank or depends on income from someone else who works in the bank.
Since Buhari announced the TSA policy a lot of bank workers especially the youths have lost their jobs.
Zenith Bank, according to HURIWA has allegedly downsized it’s staff strength even as other commercial banks are about now rolling out their anti employment policies because of the adverse effects of the withdrawal of huge fund by government agencies and the closing of these accounts for subsequent transfer to Central Bank.
“This policy will further expand the frontiers of crimes and vices of youth prostitution. The federal government must review this directive because pulling out government funds from banks will backfire because interest rates for borrowings will skyrocket since there will be scarcity of fund from which to lend to small, medium and large scale entrepreneurs in Nigeria and this would stifle the manufacturing and job sectors. If government is desirous of tightening it’s financial dealings then it should effectively strengthen the office of auditors in the federation so these offices engage globally acclaimed forensic auditors that can have greater autonomy to more independently monitor financial transactions of government agencies. TSA is a vote-of-no confidence on auditors because why waste resources to maintain the office of auditor general of the federation who isn’t competent and professionally independent minded to track financial dealings by government at all levels?”
Culled from: http://sunnewsonline.com/new/tsa-will-kill-common-man-before-corruption-nigerians/