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The CBN stated this in a communiqué at the end of its 235th Monetary Policy Committee (MPC) meeting Tuesday.
A TSA is an essential tool for consolidating and managing governments’ cash resources. In countries with fragmented government banking arrangement, the establishment of a TSA receives priority in the public financial management reform agenda.
According to the International Monetary Fund (IMF), the primary objective of a TSA is to ensure effective aggregate control over government cash balances.
Therefore, the CBN noted the “erosion of the fiscal buffers through the depletion of the Excess Crude Account (ECA) has further exposed the economy to vulnerabilities while the fall in oil revenue has left capital inflows as the only source of external reserves accretion.”
It also expressed concern that the federal government’s debt had also risen phenomenally along with its deposits at the deposit money banks. This, it said, showed the federal government as a net creditor to the system.
“This underscores the urgent need for the immediate implementation of the Treasury Single Account. The continued delay in returning government accounts to the Central Bank is adding to the huge cost of government debt due to poor cash flow management,” the MPC statement added.
Furthermore, it showed the broad money supply (M2) contracted by 6.16 per cent in October 2013, over the level at end-December 2012. When annualised, M2 contracted by 7.39 per cent, in contrast to the growth of 8.24 per cent in the corresponding period of 2012.
According to the central bank, M2 was also below the growth benchmark of 15.20 per cent for 2013.
“Aggregate domestic credit (net), however, grew by 7.32 per cent in October 2013, which annualised to a growth rate of 8.78 per cent over the end-December 2012 level, in contrast to the contraction of 3.30 per cent in the corresponding period of 2012.
“The annualised growth rate in aggregate domestic credit (net) at end-October 2013 of 8.78 per cent was below the provisional benchmark of 22.98 per cent for 2013. The decline in M2 was traced mainly to decline in net credit to federal government and net foreign assets and other assets (net),” it stated.