WHEN the Buhari-led Federal Government mooted its desire to start implementing the Single Treasury Account (TSA) few months ago, many Nigerians received the presidential moves with mixed feelings. The reactions of people cut across professional lines: Bankers, forex dealers, insurance practitioners, builders and even traders have different views on the implications of adopting that type of fiscal policy, especially at this period that Nigeria is experiencing a lot of economic challenges.
The government made the first moves sometime in July this year but as at today, the enforcement of the Treasury Single Account (TSA) has been finally adopted by the Federal Government. Even before it was mentioned, Nigerians have expressed fears of liquidity squeeze due to the possible unification of government accounts by the Federal Government.
No doubt, there was genuine need to fear at that early period; and with the Monetary Policy Rate at 13%, Cash Reserve Ratio (CRR) at 20% and 75% for private and public sector deposits respectively, it was very clear that its implementation would be tough for banks particularly.
The effects it has on banks are colossal. First is that the financial policy is capable of pruning down the workforce of virtually all financial institutions in the country. By so doing, there will be more pressure on the labour market, which is already saturated with high number of unemployed youths. It is interesting to note that most Nigerian banks survive and service the manpower development with the proceeds got from interests. When these banks are forced to keep these monies in the CBN coffers, then those benefits must have been removed completely.
That is not all; another critical aspect of the STA fallout is that returns of lenders in Nigeria, driven substantially by net interest margins, would further be wiped away by the STA implementation.
It is so, because the STA, which is supposed to unify and monitor incoming and outgoing government transactions for transparency and accountability, will deny the banks huge funds belonging to Ministries, Departments and Agencies (MDAs), which were hitherto lodged in the vaults of banks.
But common sense dictates that if you don’t pump money into the system, nothing happens. How then can the banks finance private sector investments, small and media scale enterprises (SMEs) and other microeconomic projects capable of taking the economy to the next level with the STA regime? With dearth of money in the system, portfolio investors from outside the country, no doubt, may not be interested in doing business in the country.
The unfavourable investment climate has been made even more difficult, following the recent ban on payment of cash into domiciliary accounts in the country by Central Bank of Nigeria (CBN). Although the apex bank said that it took such action in order to stop illicit financial flows in the Nigerian banking system, a move that aligns with the anti-money laundering stance of the Federal Government, but how can it be explained that such drastic action is coming at a time President Buhari is unable to appoint his ministers who, ordinarily, would have assisted in facilitating the budget process. In the absence of ministers, is it any surprise that the government of the day has not shown or indicated any form of economic master plan to her people?
The value of Naira has continued to nosedive. Last September, the CBN devalued the currency to 168 against the dollar in its struggle to rescue the naira. However, the intervention didn’t stop the currency from slumping further. This free fall is taking place notwithstanding Buhari’s campaign promise to strengthen the naira once he assumed office. The impression given by Buhari and the All Progressives Congress, APC, leadership was that Jonathan was responsible for the depreciation of the naira even as the former president’s economic team had correctly fingered falling oil practices. Reports had it in one of the dailies where Buhari was quoted to have said that he would bring up the Naira equal to the dollar if he was elected.
Unfortunately, the APC had driven partisanship to a ridiculous dimension denigrating the former president in very uncomplimentary language as an incompetent manager of the economy. So, what is happening now? Is it not ironical that the same APC is now blaming falling oil prices for its gross inability to deliver on campaign benchmarks? Or is it the case of what goes round comes around? Poor me: I was among those who naively thought that when Buhari sailed on, he would use his magic wand to automatically stabilise the naira and take the Nigerian economy to the next level. The way things are, I do not think we are anywhere near that land of “milk and honey” promised us by the president.
Be that as it may, Nigeria has not experienced this level of economic hardship in a long time. Nor have we been so annoyingly confronted with a government that refuses to operate the national budget while borrowing recklessly to fund operations and stultifying capital projects. To imagine that virtually all construction work has ground to a halt bespeaks of scuttled infrastructure growth not to think of the spectre of grinding unemployment that looms in the horizon, what, with construction companies alone said to have released a staggering 64, 000 hands into the labour market. What exactly is Buhari up to? Where is his economic agenda? Where is his magic wand?
As at today, many private enterprises have also been hard hit. Many have closed shops and the few ones remaining are groaning under the pressure of harsh economic policy coupled with unfriendly business environment. Traders can’t source foreign exchange.
Financial institutions are the primary victims of Buhari’s economic ruckus as the banks are no longer in a position to sustain the labour force they are carrying. Recently, Fitch Ratings warned that Nigerian banks might be heading into financial and operational storms. It based its opinion on what it described as the increasing difficult conditions under which the banks are operating. One would have, therefore, expected the government of the day to create enabling environment for these financial institutions to survive but the reverse has remained the case since May 29 this year. Could it be part of the change phenomena?
Whether the banks would survive or not depends largely on government policies and reforms targeted at sincere growth and development of the economy. Buhari should, therefore, come out openly and point to the direction where Nigeria is heading to. He should learn to work with the budget and also intimate Nigerians on the proper amount of money in the system. In addition, he should meet up its obligation to the people and make sure there is liquidity in the economic system so as to open up avenues for investments, economic activities and growth generally. We have waited for so long and those pre-election promises are obviously, not what we are getting as at today.
Change, sometimes, from my standpoint, could be a mystery if not outright misery!
Source:The Sun
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