TSA: Banks move N1.2 trn to CBN

Banks made no bids on the inter-bank money market yesterday as they were engaged on how to comply with the directive to transfer government revenues into a single account with the Central Bank.
President Muhammadu Buhari had ordered that all revenues be paid into the “Treasury Single Account” (TSA) from yesterday, as part of a drive to fight corruption and aid transparency. “No trading is currently going on because no bank was willing to put out quotes until there is a clearer direction with the implementation of the Treasury Single Account,” one dealer said.
“The market is frozen right now, as no trading is going on,” a bank treasurer said.
Analysts have predicted that implementation of the government policy will drain liquidity from the banking system, potentially putting some banks in a dire situation.
The overnight lending rate closed at five per cent on Monday, but dealers said the rate was initially quoted at 200 per cent yesterday. No deals were done using that rate.
About 1.2 trillion Naira, or 10 per cent of banking sector deposits, is expected to be transferred to the government account with the Central Bank in the course of implementing the TSA policy.
Bismarck Rewane, CEO of Financial Derivatives Company said: “We expect an initial paralysis in the market and a disruption of operations of some of the banks, but they would overcome that.”
He said the Central Bank could reduce the size of the Cash Reserve Requirement (CRR) commercial lenders are expected to keep and inject some liquidity into the banking system to minimize the impact of the new accounting policy. The CRR, which is the amount the Central Bank requires banks to set aside, is currently 31 per cent for both public and private sector deposits.
We’ll comply with directive— Banks
Many of the banks contacted by Vanguard said they will comply. This is because since it was the CBN that provided the list of MDAs accounts for banks to move the funds in them to the Single Treasury Account,  it is CBN that can say a particular bank has complied. “By the end of today (yesterday) each bank will know if it has satisfied the CBN,” one of the banks’ treasurers told Vanguard.
An official of Guaranty Trust Bank, who did not want his name in print, said that the CBN gave banks a very long list of accounts of MDAs in banks. Each bank was told to identify the accounts domiciled in their bank and remit the funds to the CBN. He said that the list was very long, showing that the CBN did its home work. He said that banks have no option but to comply with the directive, saying that the policy will further squeeze  the already tight liquidity situation in the economy.
He, however, said that if government fulfills its obligation by paying contractors its debt, part of the money will return to the banking system.
Another banker with First Bank said that “the deadline for the implementation of TSA was yesterday and we can confirm to you that the bank is in the process of complying with the directive. As we speak, we would not be able to give an accurate figure involved industry wide.” It was the same story at UBA.
Data from the CBN indicate that as at end of June, 2015 total deposits (demand, time and savings) in the financial system was N13.5 trillion. Analysis of this shows that the private sector accounts for  90.7 per cent (N12.2trillion) of total deposits, while public sector funds accounts for 9.3 per cent (N1.3trillion) which will be lost to TSA.
In a circular with reference No BSD/DIR/GEN/LAB/08/048, dated September 7, 2015, entitled: “Deadline for transfer of Federal Government funds to Treasury Single Account,” signed by Mrs. Tokunbo Martins, CBN Director of Banking Supervision, the CBN warned that it would “impose severe sanctions on any bank that fails to comply on or before the deadline of September 15, 2015.”
President Muhammadu Buhari had on Monday set a deadline of September 15 for MDAs to commence the use of the approved government bank accounts for payments as part of efforts to ensure transparency and stamp out corruption, following observations that some officials were foot-dragging. Femi Adesina, the President’s spokesman, had explained that all receipts due to the government or its agencies must be paid into the TSA maintained by the CBN and linked to other government bank accounts, before the deadline.
Since August 2013, when the CBN raised the CRR from 12 per cent to 50 per cent, banks have continued to struggle to source deposits from the private sector and individuals, through increasing interest rates on savings accounts and other facilities.
Public sector deposits with banks which only fell two per cent in October 2013, representing N3.99 trillion from September’s N4.06 trillion, stood at N4.02 trillion in November