Indications emerged at the weekend that a combination of dwindling revenue of the nation’s money deposit banks on the one hand and a cocktail of measures put in place by the Central Bank of Nigeria (CBN) to rid the financial system of excess liquidity may set state governments and banks on a collision course in the days ahead.
Financial industry sources said some banks are now developing cold feet to honour cheques emanating from state governments in full, the liquidity position of such states in the affected banks notwithstanding.
The development is said to be hitting states’ finances as preparations for next month’s general election hot up.
Sources said a number of states have had to protest to management of banks over the decision of the latter to peg the amount that could be withdrawn by state governments in recent times. An official of a state government in the South-west region said the state had to settle for amount lower than cheques presented to banks few weeks ago.
According to sources from the banking industry, operators are undergoing serious pressure as income streams shrink in response to the tight monetary policy of the CBN and other policies that make bank customers to pay less for services.
“Banks are under pressure not only from state governments but also from corporate depositors these days. The naira devaluation and the policy on cash reserve ratio have combined to put banks in a tight corner,” a source from one of the banks said.
The CBN’s Director, Corporate Communications Department, Mr. Ibrahim Mu’azu, said the CBN did not direct banks to peg withdrawals, explaining that banks may be using their descretion in their operations.
Those that suspected that the directive to banks to peg withdrawal by states could have been initiated by the CBN were quick to link the development to the recent hike in public and private sectors funds as a way of reducing the liquidity in the system especially as the nation faces increased pressure induced by oil price volatility. Banking industry watchers said the measure may have been arrived at by banks at individual level given recent constraints to their income generation activities by the recent the decision of the Federal Government.
The Federal Government had directed all ministries, departments and agencies MDAS to close their Revenue Bank Accounts with Deposit Money Banks latest by February 28, 2015.
The Federal Government is currently facing a real battle of getting revenue collecting agencies to remit accurately and timely what they generate on its behalf into the federation account.
With the new platform, all receipts by MDAs will now be made directly to the consolidated revenue fund at the CBN through electronic channels, a process called the e-collection.
The Accountant General of the Federation (AGF) Mr Jonah Otunla, who stated this Tuesday in Abuja at a workshop on the take-off of the electronic collection project, said the balances of the revenue account, belonging to all MDAs should be transferred to the Consolidated Revenue Fund of the Federal Government.
He said: “MDAs are given up to February 28, 2015 to close RBA. Appropriate sanctions shall be applied against any MDA that fails to comply.”
The directive was because the federal government had unveiled an Electronic Revenue Collection platform to help it improve on its Internally Generate Revenue (IGR) efforts in view of declining oil prices.
Otunla said the commencement of the e-collection platform was a product of series of treasury reforms started in 2012 to ensure transparency and accountability in the management of the nation’s resources.
Saying government was not perfecting a system to deprive commercial banks of income, the Accountant General said: “Our efforts this morning on the e-collection of revenue is a revenue enhancing programme by freeing more funds for budget performance. We are perfecting a system of collection.”
A number of banks have found a leeway in tax and revenue collection mandates from the federal and state governments; their agencies, ministries and parastatals to mobilise cheap deposits until such deposits are required by the agencies.
Among the notable agencies of the government that have formed a mutually beneficial relationship with the banks are the Federal Inland Revenue Service, the Nigeria Customs Service and distribution and generation companies among others. In August 2013, the House of Representatives had accused 21 money deposit banks of defrauding the Federal Government of money running into billions of naira through tax evasion, non-remittance of tolls and falsification of official financial records, saying the heads of the banks had queries to answer.
Some of the affected banks were Citibank, Stanbic IBTC, Standard Chartered Bank, GTBank, Access Bank and Zenith Bank.
Others are, First Bank, Union Bank, United Bank for Africa, Diamond Bank, Unity Bank, Fidelity Bank, Mainstreet Bank, Sterling Bank, Heritage Bank, Ecobank, FCMB, Wema Bank, Skye Bank, Enterprise Bank and Keystone Bank.
The House Committee on Finance said it had been inundated with reports on cases of tax evasion and sharp practices in tax remittances by banks.
The committee alleged that a poor quality of returns by the banks, discrepancies in data submitted, outright refusal to present documentary evidence, and blanket violations of existing laws, self-exemption from existing rules, false declaration, manipulation and distortion of information among others characterised the process of revenue collection by banks.