The global economic meltdown, depreciation of exchange rate of the naira and, recently, the implementation of the Treasury Single Account, TSA, by the Buhari administration have all conspired to tighten the liquidity noose on the Nigerian banking industry. Now the banks have responded by disengaging thousands of their staff. It however remains to see if this drastic measure will save the banks.
There used to be a time when being a banker connoted success and good life. It was a time when bankers drove good cars and lived in good houses and it seemed like nothing was beyond their reach. Every graduate, or almost every graduate, wanted a bank job because they wanted a part of the good life, glamour and social respect bankers commanded. Unfortunately, that time seems to have gone for good. The bubble of fantasy has long been busted in the banking industry. The story of good life that used to be associated with the industry has long vanished. Nothing is really the same again in that sector. Despite the glamour of their offices and seemingly expensive lifestyle, bankers are groaning and the reasons are obvious.
The economic climate has changed! The global economic meltdown which hit almost a decade age was the first sign of crisis. That crisis never really went away. After then came fallen global oil prices, depreciation of the naira and the recent Federal Government policy of Treasury Single Account, TSA. All these economic developments have conspired to stagger the banks into a seemingly perpetual instability. Despite what their corporate communication managers come out to say, Nigerian banks are enmeshed in crisis. And the signs are beginning to be obvious.
Since the start of the global economic meltdown, several banks that looked healthy on the outside have been washed away into oblivion; many others barely made it through the crisis, surviving by skin of the teeth, and only a handful of others have emerged stronger. Since that time till now, thousands of bankers have lost their job and those who were spared have been forced to accept a much reduced salary and allowances. The banks have become unfortunate victims of their success and now they are forced to face reality. Unfortunately, these sordid realities have refused to go away fast.
Recently, many of the banks obviously in a bid to keep afloat have been forced to wield the big stick on thousands of their staff. One of the banks that has been in the news for massive downsizing is Access Bank Plc. As a matter of fact, it seems this practice has become an annual ritual for Access Bank, which acquired Intercontinental Bank. In the wake of the banking consolidation exercise, the bank dispensed with the services of over 1,600 of its workers across the nation. Mainstreet Bank, one of the three nationalised banks is reported to have equally sent more than 400 of its workers away for a similar reason.
Analysts are of the opinion that the decision by government to implement the TSA will not augur well for the banks. As the policy is being enforced banks have lost about N1 trillion in deposits. Although in recent times the banks have come out to say that the TSA will not affect their financial outlook significantly, even the Central Bank of Nigerian has dismissed reports that the TSA has made the banks weaker but reports emanating for the system proves otherwise.
A source who is a top management staff of one of the first generation banks said few weeks ago, that his bank sacked one thousand staff nationwide, adding that the most affected in the downsizing exercise are desk officers.
He disclosed that closure of government accounts with banks has left the banks with only one alternative and that is to reduce its work force. It would be recalled that the banking sector is the highest employer of labour in Nigeria. According to him, the TSA policy, although designed to ensure accountability and transparency, it is equally going to ground a lot of the banks.
Even UBA is not left out of the crisis. Last year it was said to have sacked over 500 staff, while Union Bank sacked about 150 just in the same period. Only GTBank perhaps is not affected by the crisis. However, one inside source noted that the staff of the bank don’t feel secure. The source reported that the bank engages in systematic downsizing. They try to cover it up as incompetence on the part of the affected staff, the source said. Another source in First Bank who spoke with our correspondent also corroborated the earlier claim. He noted that First Bank at the moment is not as strong as it should be with regards to liquidity. As a result the bank has drastically cut down on its operation budget.
Asked about the recent campaign that the bank has launched, he noted that the campaign is just like a smoke screen to give the public a false impression about the financial health of the bank. “We have no money for a lot of the things we planned to do. Even the advertising campaign is just to give the public a false impression of the liquidity condition of the bank,” our source said.
He also added that the change in management at the bank cannot be divorced from this unfortunate reality, adding that the bank is opting for a younger management in order to rescue the bank from going down and being able to reposition it to tap into the growing youth market. It should be noted that the youth market has become the attraction for all the banks. Many of the banks are now rebranding and churning out new products designed for younger people.
Diamond Banks Plc. has also had its fair share of the downsizing. Recently the bank sensationally asked over 1,000 workers to find another job. Finding by Waka About Africa revealed that the latest disengagement by the bank had to do with the need to realign its operations for a tougher 2015, especially as the monetary policy environment continues to get tighter.
That’s not all, we also learnt that the bank is considering a reduction in the number of new branches to be opened this year. A source within the bank told our correspondent that major projects and sponsorship programmes for third-party companies, which may not readily add to the bottom line, are also due to be axed by the bank.
It could be recalled that Skye Bank Plc., earlier in the year, announced that it had transferred its tellers, drivers, security personnel and other support staff members to three outsourcing firms, a move that will affect hundreds of the bank’s workers. The decision led to the disengagement of the affected employees from the bank and their subsequent transfer to third-party firms.
The outsourcing companies appointed to take over the employees are Optimum Continental Services, Strategic Outsourcing Limited and Integrated Corporate Services Limited. The bank gave the assurance that the outsourcing firms would engage the affected employees under the same terms and conditions as they were employed by the financial institution.
A lot of the staff that have been laid off by the banks in the wake of the current crisis are those without regular employment. Sacking this category of staff of course comes with very minimal legal and labour issues. “The problem is that, if you lay off permanent staff at once, you also have to pay them all their entitlements otherwise they will take you to court. Yes, majority of the people we truly do not need are unfortunately the permanent staff, but because of the confusion and litigation that will follow, we decided to relief those with temporary appointments. It is a painful decision, but we have to do it in other to save the banks.
It could be recalled that global rating agency, Fitch Ratings, and other international and local research firms had late last year predicted that Nigerian banks would witness a fall in profitability this year. On November 25, 2014, the CBN’s Monetary Policy Committee depreciated the naira by eight per cent; raised Monetary Policy Rate from 12 to 13 per cent; and also increased the private sector Cash Reserve Requirement from 15 to 20 per cent.
The development which led to the immediate withdrawal of about N500bn from the banking system, was said to have affected the banks adversely. Also, in a bid to halt the sliding naira, the CBN had in December stopped the banks from keeping any of their funds in foreign currencies. It also said dollars bought from it must be utilised within 48 hours, adding that the actions were aimed at stopping the banks from speculating on the exchange rate.
Experts said the recent regulatory measures would have major negative effects on the banks this year, adding that they were already feeling the effects of previous actions by the CBN, especially the increase in public sector CRR, the Asset Management Corporation of Nigeria’s levy increase, and the gradual removal of certain bank charges.
Fitch, in a report released on October 8, 2014, said actions aimed at protecting the economy and the banking system by the CBN would make the profits of the Deposit Money Banks for this year drop. Experts have said that the outlook of the banks are not good and have warned that except by some good fortune and tough fiscal and monetary measure the dark clouds may not go away so soon.