March 2, 2016
His Excellency
Dr. Olubukola Saraki
Senate President & Chairman of National Assembly
National Assembly Complex
FCT, Abuja.
Dear Sir,
THE TREASURY SINGLE ACCOUNT [TSA]: MAJOR REASONS WHY THE SENATE MUST RESCIND ITS RECOMMENDATION
The Coalition Against Corrupt Leaders (CACOL) is a group of organizations with the objective of fighting corruption and corrupt persons at all levels in Nigeria. We also strive to protect interest of persons or groups found to be victims or potential victims of corrupt practices or process manipulations.
The Coalition was happy when the Senate, under your leadership, at its sitting on November 11, 2015, debated a motion sponsored by Senator Dino Melaye on “Abuse and Mismanagement of the Treasury Single Account (TSA)”, and resolved to, among others, mandate the Joint Committee on Finance; Banking, Insurance and other Financial Institutions; and Public Accounts to carry out a holistic investigation on the matter.
As an aggregate of human rights, community based and civil society organisations with an anti-corruption agenda across Nigeria, we are concerned that the TSA initiative, which has recently made it possible for Nigeria to significantly improve the management of her cash assets and finances especially in the face of dwindling crude oil prices, must not be mismanaged under any guise.
Hence, we have closely followed the Senate’s investigations into the matters, including attending the Senate joint committee sessions held with major stakeholders involved in TSA (i.e. Accountant General of the Federation [AGF], the Central Bank of Nigeria (CBN), SystemSpecs Limited and Commercial Banks, held in December 2015 at the National Assembly.
We were lucky to be present when the Joint Committee presented its report to the Senate at the plenary session of January 24, 2015.
Our critical review of the report however leaves us surprised and, we hereby submit that the recommendations, which the Senate under your leadership adopted, is at variance with body of the report.
We are even more surprised that the plenary did not subject the report to the required legislative scrutiny which has been the usual practice under your leadership, before it was wholesomely adopted.
With a huge sense of responsibility, we are left to conclude that the recommendations, if implemented as adopted, would represent:
- A deadly attack on the FGN TSA project with a view to killing it and reversing all the gains recorded within the short time of its implementation
- A flagrant disrespect for the rule of law and disregard for all known tenets of settling commercial disputes
- A derision of the much talked about “Patronize Made-in-Nigeria” campaign being championed by some notable Senators and your distinguished self, and
- A virulent attack on innovation and entrepreneurship in Nigeria.
To avoid the unintended consequences of its recommendation, which may not have been considered before now, we hereby present for your consideration major reasons why the Senate under your leadership must review and rescind the recommendations of the Committee:
- On what basis should CBN terminate the TSA contract?
The joint committee’s report in one breath severally insinuates that there is no valid contract between SystemSpecs, the company that provided the Remita TSA collection platform and the CBN; and in another breath, recommends that the contract should be immediately terminated.
Our investigations however reveal that the CBN and the OAGF independently issued at least five circulars/letters at different times where Remita is specifically mentioned. Can institutions as big and structured as the CBN and OAGF do this without any contract between it and a vendor?
It is perplexing to say the least why contract termination is the one and only call of the Senate in a matter its own committee firmly established as being one of mainly commercial terms as it expressly stated in Section 6.1.4 of its report “what is rather in contention is the cost and terms of engagement of vendors whose services have been procured for the implementation of TSA’s e-collections.”?
Considering that contractual agreements between two or more entities typically become subject of termination mainly due to under-performance, why is the Senate’s recommendation not a review of the contractual commercial terms rather than an outright the termination of contract?
Could it then be safe to conclude that there is a move within the Senate to use the termination of the contract which will naturally frustrate the TSA project, still at its infancy, as an excuse to exempt the Senate from compliance with TSA to which President MuhammaduBuhari has consistently pledged commitment?
Did the Senate consider possible implications of forcing the CBN to IMMEDIATELY terminate the contract?
- What measures if any has the Senate proposed to manage the consequences on the economy ofimmediate disruption of the already settled nationwide TSA payment and revenue collection processes?
- How will the about 900 MDAs already operating on TSA continue their payment and revenue generation operations the next morning after the CBN is forced to cancel the Remita contract?
- What should happen to the investment in infrastructure, processes and people already put in place on account of the FGN TSA by the 18 commercial banks, over 400 micro-finance banks and other players in the electronic financial ecosystem?
- How are the millions of Nigerians who now pay for critical health services and students who pay tuition and other fees through TSA supposed to undertake such transactions the morning after the CBN would have been railroaded to cancel the Remita contract?
- What would immediately happen to CBN’s own internal control and operational processes in respect of management of the TSA which is now at the heart of the government’s cash assets and financial management?
- Are there other standby platforms immediately available to the CBN and OAGF to continue TSA operations without causing regrettable hitches to government operations and severe pain to citizens?
- If it has taken TSA collection operations about four (4) years to see the light of day, and the country is just beginning to reap dividends, which one would serve the larger interest of our country better at this time - contract termination or a review of commercial terms?
As far as CACOL is concerned, the Senate’s recommendation for termination of the contract is provocative, retrogressive, insensitive and suspicious to say the least.
- Disrespect for Contracts
Your Excellency, we consider it most unfortunate that the Senate Committee during its sittings and in its eventual report, laboured endlessly to find ways to establish that SystemSpecs had no valid contract with the CBN in respect of its selection to provide and support Remita as the TSA payment gateway platform. The Committee vehemently asserted that because a different set of people from those who signed the initial contract signed the updated renewal contract therefore renders the later contract invalid and non-binding. The question the whole world has been asking is whether the CBN has ever denied that it has valid and subsisting contracts with SystemSpecs, and on which it issued many circulars over a number of years.
Many people are beginning to question the worth of any agreement with the government and other public sector institutions in Nigeria. This is surely not good for our national image, neither is it a good perfume that will attract foreign direct investment. It is at best one of the major reasons why many people do not want to do business in Nigeria or with Nigerian Government, if the rules will simply be changed in the middle of the game without warning or reason. At the risk of being misconstrued to be holding brief for some investors involved in some government contracts in Nigeria, some of who could have been genuinely fraudulentand deserved their punishment; but would this not give an impression that Nigerian government and her agencies don’t do adequate analyses on contractual agreements before entering into them only to violate such agreement with impunity afterwards? The following technology related cases which have removed, rather than add to the government’s goodwill come to mind; Maevis vs. FAAN; Chams vs. NIMC; Manitoba vs FGN/TCN etc. Should we continue along the same path or look for ways to avoid more of such? Has our country not paid enough for the reckless acts of disrespect for contracts?
Sir, our sense of patriotism makes us fear that, if such assault on entrepreneurship, hard work and creative technology is not addressed, Nigeria stands the risk of discouraging the younger generation who look up to mentor organizations like SystemSpecs, clearly one of the best technology firms out of Nigeria and indeed Africa
Our conviction is that it is grossly unfair, unethical, unjust, grossly punishing and extremely evil to attempt to change the game in the middle of the road in stark disregard for contractual terms. Unilaterally changing the agreed terms and mandating the CBN to reduce earned fees by over ten-fold and then terminate the contract without recourse to the contracting party especially after value has been consumed is uncivilised and callous and such suggestion should never have emanated from the hallowed chambers in the first place.
The Senate under your leadership should only do what will make it a hallowed chamber that promotes peaceful and fair resolution of issues rather than anything that can project it as the source of caustic contention.
- Replacement of an indigenously developed platform with a foreign option
According to section 6.3.2 of the report, The Senate in its wisdom noted that the most desirable strategy for the CBN to manage the TSA is a two-step approach that starts with piloting the TSA collections with a locally designed bespoke software solution like Remita and when things have been perfected, the CBN should transit to the more sophisticated and tested commercially available off-the-shelf (COTS) foreign software like SAP, Oracle Financials, Epicor, Navision etc. By the way sir, all the foreign named software in the Senate’s report are NOT e-payment solutions. They are Enterprise Resource Planning (ERP) applications that have nothing to do with electronic payment in any form whatsoever.
The Senate has, with this mind-set, clearly shown that the hallowed chamber and most of its distinguished members are only paying lip service to “Patronize Made-in-Nigeria” campaign. Or how else can one describe the Senate of the Federal Republic of Nigeria asking the CBN to drop what has turned out to be an efficient locally developed application that has become the pride of the nation for a foreign one for no just reason. Is this what other countries do?
We do not want to believe that the Senate by choosing to ignore the testimony of the CBN at the public seating that Remita was selected after the evaluation of various options which included the foreign developed RTGS platform. If for once indigenous software has been selected to play such a significant role in our national life and it has not been found wanting, where on earth could the inspiration have come from to the Senate to recommend that it be replaced with a foreign solution?
Your Excellency, this is a time when all well-meaning Nigerians should not sacrifice patriotism on the altar of petty politics but join President Buhari to build up local capacity in diverse areas that have potentials of helping the nation become less dependent on foreign sourced input to become a net exporter of value-added goods and services thereby harnessing foreign earning potentials.
Is it not sufficient shame that as at today, all the software driving most of our economy at the federal and state level and even most of the private sector is foreign sourced? Why then must we frustrate one of the rare opportunities we have to showcase to the world that we have what it takes to address our own need? Must the Senate be the one at the vanguard of Kill Nigeria that foreign businesses may prosper? We join the majority of well-meaning Nigerians to say an emphatic “GOD FORBID”!
We hasten to ask whether the country is really committed to diversify the economy. If as a nation, we are really committed to growing our non-oil sector, the development of indigenous software is one of the areas it should explore.
Your Excellency, to do this, the country should be prepared to adequately and fairly reward those who have spent years designing solutions that are adding value to the society. We must not be afraid to make billionaires out of our software industry. That the wealthiest people in the world are in knowledge economy, particularly software is not an accident. Therefore, we must be careful not to scare intellectuals and core professionals from wanting to do business with the federal, state or local government.
Information Technology [IT] is playing an important role in India today and has transformed India's image from a slow moving bureaucratic economy to a land of innovative entrepreneurs. What is the vision of the Senate for Nigeria’s IT industry?
- How did the Senate arrive at TSA Collection fees recommended to CBN?
Your Excellency, apart from ordering the CBN to terminate its contract with the providers of the TSA e-collection platform, the Senate in section 7.5 of its report also recommended that already accrued transaction fees be slashed from about N7 billion to N656 million which is to be shared by all stakeholders involved in TSA collections!
Is the recommendation to offer the vendors an amount far less than contractually agreed a ploy to frustrate them and make them walk away from the TSA project so it can collapse or so that it can be awarded to other local or foreign contractors anointed by the Senate?
Our attempt to understand the Senate’s basis for the slashed fee recommendation indicates it assumed a false position of alluding to a non-existent CBN e-collection tariff. Our investigation shows the CBN has never and does NOT currently have any tariff to regulate e-collection schemes. This is one of the many gaps we observe in the report.This suggests thatless than requiredattention was paid to gathering information expected to guide recommendationson such a serious national initiative as the TSA.
The committee obviously confuseditself by assuming e-transfers and e-collections mean the same thing. Would a simple check with CBN not have confirmed that electronic transfers and e-collection schemes are not the same thing and cannot be used as synonyms?
The Senate further claimed that commission charged for collection due to FIRS, Nigeria Customs Services and others are different rates all less than 1%, and it is therefore not tenable for CBN to have agreed to the multi-stakeholder agreed charge of 1% to get the FGN TSA e-collections initiative off the ground. Do the differing rates quoted by the report not indicative of the non-regulated pricing regime for collection schemes?
In all of these, it seems the joint Committee somewhatconveniently forgot to mention some other things we discovered during our independent investigations which include:
- All the examples provided as reference benchmark for collection fees involved banks not only earning transaction fees but in addition having custody of collected funds for a certain period of time within which they trade with the funds to make huge profits. It is common knowledge that the banks cherish the float more than the actual revenue from transaction fees. This is why transaction fees can be “decorated” to as low as 0.3% since they know that is not where the real money is.
- In the case of TSA collection scheme, CBN does NOT allow the banks to keep any float as all collections are immediately remitted to the FGN account in CBN. This is one of the cardinal principles of TSA. Compensation for the absence of float income to the bank necessarily means collection fees cannot be retained at the same level of 0.3% or 0.5% when there was access to float.
- The report copiously focused on statistics of collection scheme rates below 1% but said nothing about MDAs who entered into revenue collection arrangements with different organisations (many unknown to the CBN and OAGF) until the arrival of TSA. Examples of these include:
- JAMB – 9%
- National Drivers’ License – 6%
- International Passport – 4%
- WAEC – 2%
- Nigeria Ports Authority – 1.5%
- Department of Petroleum Resources (DPR) – 1.5%
We believe the committee missed the point severally made during its sittings and which we also discovered during our investigations, that collection scheme fees are always negotiated and arrived at depending on many factors.
What made the Committee ignore all the above and selectively conjure a compensation model for determining applicable fees without regard for the complexities or dynamics of the scheme can at least be described as highly suspicious.
The least expected of the distinguished Senate would have been to urge the CBN and OAGF to review and renegotiate the contract’s commercial terms especially as we learnt during the Senate sittings that the contract provides for such reviews.
- An Attack on the Future of Innovation and Entrepreneurship in Nigeria
Your Excellency, as one from a reputable entrepreneurial lineage, you would undoubtedly have been exposed to the sacrifice and pains that go into building and nurturing any successful business especially in a hostile environment as ours.
The memories of the circumstances that led to the demise of one of such enterprises over which you superintended as the CEO may still also be fresh in your mind as you relive the pain of being subjected to the vagaries of a hostile environment.
With this background in mind, dear Senate President, we expect that you will be the last person who will wish to unleash the same kind of pain inflicted on you on other entrepreneurs. In fact, you should be their champions.
While Nigerians have built many successful businesses in different areas, software business is an area where we have huge potentials but are yet to make a strong impact in over 55 years of our existence as a nation.
We have not taken this matter lightly and therefore conducted our own survey to find out a bit about SystemSpecs who today is at the centre of discourse. It is interesting to note that the company is generally held in high esteem by the Nigerian IT community and its leaders also regarded as role models for thousands of young people who want to pursue a career in computing or software development in Nigeria today.
If the Senate’s recommendation eventually leads to the collapse of such a well-regarded indigenous company, what signals would the Senate be passing across to budding entrepreneurs and other Nigerians about investing their passion in remaining in Nigeria to build businesses that provide employment, feed families and contribute to national development? Are these encouraging signals or outright suffocation of innovation and suppression of dreams of greatness which lie in the heart of every Nigerian?
CACOL condemns in very strong terms any action emanating from the Senate that stifles the development and actualisation of the entrepreneurship drive which Nigerians are known for. We will not be a part of continuing to send our best talents outside the country as input to the wealth and economic development of other nations who now package the products for re-sale to us!
It is no longer news that our athletes now compete for other nations; our footballers now play for other nations; our doctors now treat citizens of foreign nations while their own people get the least of medical attention; our sons and daughters now fight in the army of foreign nations; our brightest students are shipped to foreign universities (Ghana and Benin Republic inclusive); and yet we want to kill the few beacons of national pride we have!
CONCLUSION
We submit that the Senate should be active partners with the Executive to consolidate on the gains of the TSA, and not be seen to be undermining it under any guise.
We wholeheartedly believe the recommendation of the Senate in this instance will do more harm than good and strongly request the Senate to review and rescind its recommendations.
Thank you.
Yours in service to humanity
Debo Adeniran
Executive Chairman, CACOL
08037194969
Cc: The President, Federal Republic of Nigeria, The Presidency
Cc: Hon Minister of Finance
cc: Hon Minister, Ministry of Communications
Cc: Governor, Central Bank of Nigeria
Cc: Office the Accounting General of the federation
Cc: Speaker, House of Representatives
Cc: Executive Chairman, EFCC
Cc: Executive Chairman, ICPC
Cc: Chairman, Code of Conduct Bureau
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