Monday 16 November 2015

Treasury Single Account Controversy: SystemSpecs and Banks demand payment of processing fee; ...ready to renegotiate terms

Treasury Single Account
The controversy over the status of the processing fee approved for software firm, SystemSpecs, owner of the e-Payment and e-Collection platform, Remita, which serves as the gateway for the remittance of funds to the Treasury Single Account (TSA), has taken a new turn, as the service provider has petitioned President Muhammadu Buhari appealing that the fees earned for its services are paid.

Also, documents obtained by ThisDay and other government sources have shown that contrary to earlier reports, the controversial one per cent commission charged on the transfer of funds to the TSA was approved by the Office of the Accountant-General of the Federation (OAGF) in the last administration, and not by the immediate past Governor of the Central Bank of Nigeria (CBN) who is now the Emir of Kano, Alhaji Muhammad Sanusi II.

The 1 per cent commission,ThisDay also learnt does not solely belong to SystemSpecs but is shared by the firm which gets 50 per cent of the commission, CBN – 10 per cent, and the 22 commercial banks in the country – 40 per cent.

Although the exact amount, being the 1 per cent commission charged on TSA transfers, was not specified in the letter to the president, other documents, which consisted of correspondence between the service providers and other agencies of government showed that as at October 28, the total refund by all the banks, CBN and SystemSpecs, following the presidential directive, was N7,628,925,165.16 and that since October 27, there were no new charges on subsequent transfers.

Last week, the Senate had ordered its joint Committees on Finance, Banking and Other Financial Institutions and Public Accounts to probe the allegation that the e-Collection agent, Remita, had been paid 25 billion, being the 1 per cent commission it charged for the transfer of N2.5 trillion of federal government funds to the TSA.

The motion, which was moved by Senator Dino Melaye and adopted by the Senate, held that the N25 billion payment was in gross violation of Section 162(1) of the 1999 Constitution which states that “the federation shall maintain a special account to be called the federation account into which all revenues collected by the government of the federation except the proceeds from the personal income tax of the personnel of the Armed Forces of the Federation, the Nigeria Police Force, the ministry or department of government charged with foreign affairs and the residents of the FCT, Abuja”.

An additional N500 billion was transferred to the TSA on the RTGS platform run by the CBN, bringing the cumulative transfers to N1.5 trillion. This is a far cry from the N2.5 trillion and N25 billion paid as commission bandied on the floor of the Senate by Senator Melaye.

The documents also indicated that the management of SystemSpecs is currently under pressure from some banks who are calling for the immediate payment of their own share of the processing fee, with some of them threatening litigation.

In a letter to the president dated November 6 and signed by the Managing Director, SystemSpecs, the company has warned of the serious consequences of the disruption in the services provided by the firm on the TSA. In the letter, SystemSpecs, which said it sought for a meeting of all the stakeholders to iron out the grey areas on the processing fee, lamented that instead of an invitation for a stakeholders meeting as requested, the company received a directive from the CBN Governor Godwin Emefiele to refund all TSA e-collection fees earned to date and to suspend all charges on the platform.
The letter said: “SystemSpecs has since complied fully with this directive and refunded all monies earned to date to the CBN. This we did in good faith and without prejudice, to avoid distractions that could becloud the bigger potential of the TSA project for our country. 
“While we await clarification from Office of the Accountant-General of the Federation/CBN on the way forward, we have since suspended all TSA e-collection fees on the platform. This means that none of the TSA collection parties/channels are earning any fees for providing services to government.”
The letter warned that this position was however not sustainable as the collection partner banks were threatening to suspend TSA collections, adding that the situation would clearly be playing into the hands of those who do not wish this initiative to succeed.

The letter disclosed that before SystemSpecs was engaged to implement the TSA project in 2011, CBN had written to OAGF that the project was not feasible for at least two years.
“The initial thinking then was to use the RIGGS to support TSA transactions before it was observed that the system was not built for retail and high volume transactions.”
In the bid to dispel speculations that the contract for the TSA might have been done from the back door, the company said in the letter that “when we signified our intention to provide a solution for TSA, we were told that the Nigeria Inter-bank Settlement System (NIBSS) had also shown interest and the decision of which platform to use was left to a joint evaluation committee comprising CBN and external consultants.
“Three times, we and NIBSS made competitive presentations to the joint evaluation committee. It was clear that the wholly Nigerian-developed Remita effectively addressed all the requirements expected by OAGF and its external consultants to support TSA’s e-payment and e-collection of government receipts”.
The documents also showed that SystemSpecs had exchanged letters with other relevant authorities, the CBN and the OAGF long before the Senate motion last week alleging that the implementation of the TSA had fetched the service provider a whooping N25 billion.

In the letter, SystemSpecs said it emphasised the need to review the processing fees in view of the impact of the large fees collected through Remita at the early stage of the implementation of TSA, which the company said was not representative of the typical regular collection flows.

However, instead of reviewing the fee as advised by SystemSpecs, CBN had directed the company in a letter dated October 27 to return all charges earned on the use of Remita collection platform. 
The letter signed by CBN’s Director of Banking Supervision, Mr. Dipo Fatokun, read in part: “I have been directed to inform you that you should refund all charges (1per cent cost of collection) made into MDAs accounts as a result of the implementation of the TSA.
“The total amount should be credited into the account mentioned below: FGN Revenue a-Collection Pool Account at the Central Bank of Nigeria Account Number: 0020054161043.
“Since the cost of collection must have been shared by all the stakeholders, you are hereby required to also provide a schedule of the total amount collected and the portion that was shared to each of the three participants.
“The schedule should be prepared on month-by-month basis, from the commencement of the TSA implementation in March 2015, to date. We will recover the share to the CBN and the DMBs.
“Please note that you are required to comply with the above directive, latest, by Wednesday 28th October. 2015.”
Although it complied immediately, SystemSpecs also wrote a letter to the central bank on October 28, asking for the immediate return of their processing fees, claiming that the banks that were part of the process were already demanding their return. The company further warned that the refund might affect banks’ support for the programme given the fact that they were still reeling from the impact of government funds’ withdrawal from their vaults.

The company recalled that it had expressed its willingness to renegotiate the terms of the agreement, adding however that it was not taken seriously by the CBN.
“We had even gone the extra mile by expressing willingness to renegotiate; twice, we requested in writing that a meeting be called to agree positions. This did not happen. We do not see why we should be penalised for this,” the letter read.
The documents recalled that between May 27 and 28, 2013, CBN and OAGF jointly organised a seminar with key stakeholders on the commencement of e-collections scheduled to start January 1, 2014.

SystemSpecs, according to the letter to the CBN, proposed total fees of one per cent; banks proposed total fees of five per cent as they would no longer be able to keep floats.

The letter added that thereafter, a committee set up to advise on fees recommended 2.5 per cent but that the Accountant General of the Federation overruled it and said they would pay one per cent and not 2.5 per cent. This decision, he said, was communicated to all the parties including the CBN, banks and SystemSpecs.

Obaro in the letter added that the company was invited to an impromptu meeting by the OAGF on September 14, and was told that in view of the enlarged scope of the TSA project which would now include the FAAC accounts, which are large, they would want the charges reviewed.
“On September 16, we wrote the CBN to give a brief of the meeting with OAGF and we said inter-alia: ‘While on our part, SystemSpecs is not averse to a review of the existing transactions fee to a figure that is agreeable to all parties, we would however advise of the need to carry along the DMBs as you will recall that the current fees was agreed with the banks and communicated by CBN via a circular in December 2013’,” the SystemSpecs boss stated in the letter.
However, one of the letters disclosed that the response of the CBN came on October 23 in form of a directive to Systemspecs to return all collection fees on this platform.

The company therefore expressed disappointment with the turn of event, stating in its letter to the CBN: “I must confess sir that we certainly feel victimised with the attempt to hold us responsible for a rate that was midwifed by the CBN and OAGF, agreed to by DMBs contracted with us and simply implemented on our system as agreed.”

Credit: ThisDay

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