By Jubril Gawat

Top on the 22 stringent conditions dished out by the Federal Government, which the 36 states must fulfill to be eligible to draw from the N90 billion set aside to bail out states facing severe financial difficulties, is the implementation of Treasury Single Account (TSA).

Most Nigerian states are broke and unable to pay workers’ salaries, fund key services, or execute development projects. The states remain in financial hardship despite a July 2015 Central Bank of Nigeria [CBN]-packaged N250 to N300 billion special intervention fund in the form of soft loans to enable the states pay salary backlog.

The states have also enjoyed a debt relief programme designed by the Debt Management Office (DMO) which helped them to restructure their commercial loans of over N660 billion, extending the life span of the loans while reducing the states’ debt-servicing expenditures.

This has however failed to pull the states out of distress, and the federal government is considering a fresh N90 billion loan package for them. To access the funds, states must fulfill 22 conditions. The implementation of TSA is a crucial component of these conditions.

With the state governments facing intense pressure on their cash flows in the face of dwindling revenues and the need to meet increasing statutory and social responsibilities, it beats my imagination that only a few states had on their own taken the decision to implement the TSA before federal government’s precondition for accessing the bailout.

Faced with financial doom, I expect most state government to commence TSA processes implementation soon. I recall that the CBN, in exercise of its powers, as provided in the CBN Act, 2007, Section 47, sub section 2(2d), had in February 2016 issued guidelines on the management and operation of the TSA, hosted in conjunction with the CBN and state governments.

The guideline’s objective was to provide state governments with a clear framework to support their successful implementation of the TSA initiative, based on standardized banking arrangements, operational processes and IT infrastructure.

The TSA initiative is the operation of a unified structure of government bank accounts, in a single account or a set of linked accounts for all government payments and receipts.

The TSA is primarily designed to bring all government funds in bank accounts within the effective control and operational purview of the treasury, in order to: enthrone centralised, transparent and accountable revenue management; facilitate effective cash management; ensure cash availability; promote efficient management of domestic borrowing at minimal cost; allow optimal investment of idle cash; block loopholes in revenue management; establish an efficient disbursement and collection mechanism for government funds; improve liquidity reserve; and eliminate operational inefficiency.

Based on the success stories and challenges of TSA implementation at the federal level, I believe there are a few critical success factors, apart from adhering to CBN guidelines, which are essential for state governments’ successful implementation of the TSA and therefore access to the bailout fund.

1. Selection of appropriate FinTech: One of the most critical factors for the successful implementation and management of any TSA is the selection of appropriate financial technology firms. I expect a flurry of applications to the state governments from all manners of e-payment firms. State governments must be careful with their selection to avoid wasteful and failed project.

Besides, the state government can only adopt a CBN licensed payment platform for the operation of its TSA scheme, the states must be careful in their choice. CBN approved platforms for the controlled take-off of the TSA scheme are SystemSpecs, Interswitch, Unified Payment Services, e-Transact and NIBSS.

Since state governments cannot afford trial and error at this stage, they may have to work with only experienced payment schemesin the implementation of the TSA. This may narrow the list to only two service providers: SystemSpecs and Interswitch/NIBSS. However, other payment schemes can white-label SystemSpecs and Interswitch/NIBSS solutions for any desirous state government, if they choose to work with them

2. Right Model:There are two TSA models – The first entails that the main TSA and associated ledger sub-accounts (where they exist) are to be maintained in a single banking institution.

The second require that the main TSA is maintained with a single banking institution and associated zero balance ledger sub-accounts (ZBAs, where they exist) are maintained in other institutions from where balances are swept daily to the main TSA in the CBN or the appointed main TSA hosting financial institution.

Federal government in its wisdom is running the first model with the CBN treasury bank. It is easier to manage than the second model. Each of the state governments has to determine the model that suits its relationship with the financial institutions.

3. Selection of an appropriate treasury bank:Selection of a treasury bank is one of the most difficult decisions a state would have to make. Most states may not select the CBN as their treasury bank because of the federal government’s control overthe apex bank. However, benefits such as stability and reliability places the CBN ahead of any deposit money bank.

Each state government shall open only one main TSA account and other such ledger sub-accounts as it deems fit with the CBN or any bank of choice, provided such ledger sub-accounts shall be limited to one for each MDA and shall always be linked to the main TSA account. The choice of a state government to host the TSA main account with a bank and sub-ledger accounts with the same or other banks is guided by the same considerations as hosting the main TSA account with the CBN.

4. Appropriate contractual agreement with service providers: State governments must not commit the same mistake that federal government committed with its service providers. Therefore, each state government must maintain a fair and competitive contractual agreement(s) with parties involved in the design, delivery and ongoing support of its TSA scheme.

Such agreement should clearly define the terms, roles and responsibilities of state government and relevant parties. Such stakeholders may include, but not limited to, the CBN, deposit money banks, payment technology solution providers, etc.

5. Establishment of TSA project team: One of the drawbacks of federal government TSA implementation is the fact that there is no single driver. Between the Accountant General of the Federation Office and the CBN, no one wants to take full responsibility for the project.

Each state government should establish a TSA project team to be led by an official not below the position of a Director in the public service, to coordinate the implementation of the state’s TSA initiative. The team would have primary responsibility for coordinating all pre-implementation, implementation and post-implementation programmes required for the success of the state government’s TSA scheme. This  should include but not limited to organising sensitization workshops, system specifications gathering, project documentation, user training, change management, risk management, project reporting, etc.

6. Promulgating appropriate laws to protect the project: Each state government must ensure that all legal frameworks, extant laws, cash management processes and policies, financial regulations, treasury circulars, etc are established to guide the TSA operation, and ensure that clear information is communicated constantly to relevant internal and external stakeholders before, during and after the commencement of the TSA scheme.

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Op–ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija