- I want to know from you whether there is any country in the developing world where the executive head of every branch of any ministry, department or agency of government - federal, state and local governments - can decide to open ANY number of accounts in several private banks in the town in which his agency resides. This was what had been happening before TSA was enforced, which is actually against the Constitution. [Look at it this way: in a university, does a department open a bank account for his budget allocation? No - the university has a bank account - or many bank accounts - but the bank account is completely opaque to the department heads.]
- The TSA movement had been mandated as a GRADUAL process - since 2004 - but like all things Nigerian, people were flouting the movement, and resisting it. Some would move to TSA, and some of those same MDAs would open new bank accounts since the banks wanted their accounts. So the indiscipline continued - until orders were re-enforced by Buhari, with a deadline of September 15, 2015 - and there has been over 95% compliance.
- What the government did - or should have done - was to ensure that once ALL the MDAs moved their money into TSA, the Government ITSELF would become the major customer of those banks, and INVEST a portion of those monies into the banks, to ensure some of their previously lost liquidity was restored. The TSA was NEVER to punish banks, but to restore financial integrity in the use of public funds in the private arena.
- It is a red herring to state the the CBN CANNOT manage the funds of all the MDAs alone if it wanted to. Honestly, ALL the money (in dollar value) that we are talking about in the CBN is probably not as much as that in Credit Suisse and Bank of New York. After all, in this electronic age, much of the flows are electronic; it is not as if we are still hauling NSA money around?
--His Imperial Majesty,
Well, those who are carried away by emotions, being the ones that will first accuse you of 'atavistic this and that ', can now see some of the things we saw would happen with this silly policy. They were rather carried away by sheer headlines and sensationalism, even though many of these people are those expected to know better. Even toxicologists and carpenters became economic gurus offering their half-baked opinions and advise.
Thanks Ojare!
From: NaijaObserver@yahoogroups.com [mailto:NaijaObserver@
yahoogroups.com ]
Sent: 31 August 2016 22:10
To: NaijaObserver@yahoogroups.com
Cc: African GM <africanworldforum@googlegroups.com >; Omo Oodua <OmoOdua@yahoogroups.com>; Naija <Naijadreamteamintellectuals@yahoogroups.co.uk >; Oyo Forum State Intellectual Forum State Intellectual Forum <oyo-forum@yahoogroups.com>; Yan <YanArewa@yahoogroups.com>; Develop Nigeria <develop-nigeria@googlegroups.com >
Subject: Re: ||NaijaObserver|| Nigeria Central Bank Urges "Don't Panic" As Banks Halt Lending To Each Other
Dr John Ebohon,
Kindly see below our comments of last year on the TSA .
As predicted, TSA impacted negatively on the overall performance of the economy and I once recommended that it should be modified in a way that
the idle funds would yield good returns to the federation account instead of lying fallow in the current account of the Consolidated Revenue of the Federation held at the CBN.
Modified TSA would also lead to an increase in liquidity in the banking
system and reduce the "red tape " or official bureaucracy required
before the funds is released to the MDA and contractors from the
office of the accountant general of the federation .
Sent from my iPhone
On 18 Sep 2015, at 2:11 PM, Imperial <imperial_ltd@yahoo.com> wrote:We need to maintain some balancing in order for the Treasury Single Account policy to succeed so as not to impact on the overall wellbeing of the economy. As I have said several times, the CBN doesn't have the capacity and capability to run commercial banking activities for the federal government hence I recommended Modified Treasury Single Account .
Sent from my iPad
On Sep 18, 2015, at 13:09, John Ebohon ebohon@dmu.ac.uk [NaijaObserver] <Na ijaObserver@yahoogroups.com> wrote:
This is a serious issue that needs to be resolved urgently. This is what happens in a policy vacuum, where banks do no longer trust one another to repay overnight loans. If Nigerian Banks refuse to lend to each other, how do they expect international finance houses and multilateral and unilateral lending agencies to respond to borrowing requests? This will further squeezed the liquidity problems occasioned by the decision for all government parastatals to move their funds away from commercial Banks to CBN.
OJ
From: NaijaObserver@yahoogroups.com [mailto:NaijaObserver@
yahoogroups.com ]
Sent: 18 September 2015 12:31
To: Naijaobserver@yahoogroups.com
Subject: ||NaijaObserver|| Nigeria Central Bank Urges "Don't Panic" As Banks Halt Lending To Each Other
Nigeria Central Bank Urges "Don't Panic" As Banks Halt Lending To Each Other
When the head of the central bank utters the two words "don't panic" you know the economy, currency, and financial system is in trouble...and that's just what Nigerian central bank Governor Godwin Emefiele just did. Following government intervention to sweep cash from local to central accounts, banks have panicced. As Reuters reports, overnight interbank lending rates spiked to 200%, which Emefiele opined was "a momentary action... just sentiment," but the interbank naira market was paralyzed for a third day on Thursday, with banks unwilling to lend to each other, even when rates fell back to 20-30%.
O/N rates spiking...
And CDS imply a notable devaluation is looming...
Charts: Bloomberg
As Reuters reports, Nigerian central bank Governor Godwin Emefiele ruled out a naira devaluation on Thursday and told people not to panic about a government order which risks draining billions of dollars from the financial system.
In an interview with Reuters, Emefiele said he was ready to inject liquidity if needed into the interbank market, which dried up this week following the directive to government departments to move their funds from commercial banks into a "Treasury Single Account" (TSA) at the central bank.
The policy is part of new President Muhammadu Buhari's drive to fight corruption, but analysts say it could suck up as much as 10 percent of banking sector deposits in Africa's biggest economy - playing havoc with banks' liquidity ratios.
With global oil prices tumbling, banks and companies are already struggling with the consequences of a dive in Nigeria's energy revenues that has hit the naira currency and triggered flows of capital out of the country.
Then JP Morgan kicked Nigeria out of its influential Emerging Markets Bond Index last week due to restrictions that the central bank imposed on the currency market to support the naira and preserve its foreign exchange reserves.
Since taking office in May, Buhari has vowed to rein in Nigeria's dependency on oil exports which account for 90 percent of foreign currency earnings. However, he has faced criticism from investors for failing to appoint a cabinet yet or outline concrete policies.
Amid confusion over the implementation of the single account policy, overnight interbank lending rates spiked to 200 percent, but Emefiele denied the policy had provoked a liquidity crisis.
"There is no shortage of liquidity," he said, pointing to an oversubscribed sale of treasury bills on Wednesday. "A spike is a momentary action. It's sentiment."
"I do not think there is any need for anybody to panic," he added.
Nevertheless, the interbank naira market was paralyzed for a third day on Thursday, with banks unwilling to lend to each other, even when rates fell back to 20-30 percent.
In a sign of the financial ructions, commercial bank cash balances with the central bank that are normally earmarked for foreign exchange or bond purchases plunged to 173 billion naira on Thursday from 486 billion two days ago.
Analysts had predicted that the TSA edict could suck 1.2 trillion naira ($6 billion) out of the commercial banking system. Emefiele said the amount would be less than one trillion, although he did not give details beyond saying the measure was designed to root out graft.
His comments did not instill confidence in the new rules among economists.
"It's an example of the government deciding on a policy without thinking through the mechanics of how its implementation will work," said Alan Cameron at Exotix, a London-based specialist in frontier markets - a higher risk subset of emerging economies.
Average:
Source:
New York Times
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