With the full implementation of the TSA policy by the Buhari Administration, SystemSpecs a Nigerian technology company has been accused of swindling the country of billions of Naira using Remita, a product of the company.
The aim of this blog post is to explain Remita’s role in the implementation of the TSA and try to highlight where the issues have come from and ask some pertinent questions.
First, some background information.
TSA, which stands for Treasury Single Account is a policy that intends to consolidate all government revenues in a single account. The idea is, whether you are paying N100 for injection in UBTH (University of Benin Teaching Hospital) or buying crude oil with hundreds of millions of dollars from NNPC, or paying NTA for adverts, all the monies would be domiciled directly into a single account at CBN (Central Bank of Nigeria)
Why is this necessary? This is to avoid situations whereby, administrators of various agencies (UBTH, NNPC and NTA in our examples) from having direct control over the money collected by their agencies. If they need money, they will have to apply to get it from the CBN account. No more dipping hand into the government purse to do “thanks for coming”
Remita, The Chosen One.
Before the TSA implementation, each of the government agencies decided where to open accounts to keep these government revenues and HOW to collect the monies. So the CMD (Chief Medical Director) of UBTH could decide to open 10 bank accounts for UBTH in 5 different banks after a lot of lobbying had been done by branch managers etc, NNPC could have another 20, NTA another 15. This is also where allegations of “fixing money” for interest used to come from.
The implementation of the TSA policy (enshrined in the constitution) was piloted by the Jonathan government. Only a few MDAs (Ministries, Departments and Agencies) like the FIRS were chosen to pilot this system.
For the pilot, SystemsSpecs built a product called Remita that could be used to collect and collate money through multiple channels and was chosen to be the software to be used for this collection.
That is the first issue
Sunk Costs and Competition.
There are 2 ways people usually pay for things in Nigeria either with cash deposits at the bank or cashier points, or using a credit/debit card at a POS or online.
BEFORE the TSA implementation, each MDA set up individual systems for collections. Companies like Interswitch, ETranzact, SocketWorks, etc (which primarily do online/digital collection) already spent LOADS of money trying to get the contract to give them the right to collect money on behalf of these agencies. In some cases, they had to build infrastructure in these MDAs (computers, Internet, Generator etc) to make their work easier.
SocketWorks for instance collects money on behalf of Immigration, Interswitch on behalf of many Hospitals and Schools etc, Same with ETranzact. And we are not including “other costs” of doing business in Nigeria. SystemSpecs also had a few customers.
The Buhari then put a deadline for the TSA implementation.
The CBN rationally decided to use the provider and product that had run the pilot system and that was SystemsSpecs’ Remita.
All of a sudden from sharing the spoils of various MDAs, all the other providers lost all those customers and commissions to “one Remita of a somebody”
All their hustle, down the drain.
That is the second issue.
Commissions and Payments
When a person or an entity collects money for you, it is the norm for the person to be paid part of the proceeds to collect and reconcile that money. For online payments, there are many players who share the ~2% fee that is charged the merchant. For cash payments, it is less standardized but it can be up to say 5% of each transaction.
So of the 1000 naira you pay to UBTH via Interswitch’s WebPay or PayDirect, they take ₦20. By the same calculation, if you pay ₦1 Million, they are entitled to ₦20 000. However, there is usually a cap on the amount of commission on each transaction.
Thought Remita transaction charges are capped even on their website, it seems the deal with the federal government is 1% uncapped.
That is the third issue
BEFORE the full implementation of TSA, monies had already been collected. So let us assume UBTH had ₦1 Billion in a Unity Bank account somewhere, they were given a deadline to transfer that money to the TSA domiciled with CBN.
Note that money in Unity Bank was ALREADY less the commissions paid to collectors like Interswitch.
In transferring that money to CBN, it is alleged that the Banks rather than using NIBSS (Nigerian Interbank Settlement System, a company owned by CBN and the Banks) and paying next to nothing, decided to do it through Remita who would take an uncapped 1% (25 million in this example) for doing absolutely nothing.
That is the fourth issue
In summary, here are the questions arising that are causing problems.
- How was SystemsSpecs/Remita chosen to be the sole collector for the Federal Government? Was the Procurement Act followed?
- What happened to the existing systems that were put in place especially the ones that had long term arrangements and high setup cost?
- How monies are ALREADY in the system (bank accounts) be transferred to the CBN account?
- As for the collection, what is the commission taken my SystemsSpecs? Is it (un)capped?
Those are the main issues from what I understand from all parties. Of course aw with politics, there people are mixing up issues to sell their agenda.
That Remita stands for Remi Tinubu Ahmed as much as Jega stands for Jonathan Ebele Goodluck Azikiwe.
- For once, it is a good thing that an indigenous company is being used for such a project.
- It is understandable if the Federal Government decides to use a single provider/system for the collection of taxes and revenue. However, it could be a big risk to have one single entity doing everything from Customs to Schools to FIRS.
- There should be a transparent procurement process for the service provision and more than one provider chosen.
People are usually crying that Interswitch is the bully. It is interesting to see Interswitch crying foul.
Remita actually uses Interswitch’s WebPay for the online collections part of the as a middleman for the online payments aspect. As at yesterday when I checked, it was no longer working.
Thanks Boro for reducing the typos.