The anxiety was further heightened at the weekend, following the projection by respected economist and Managing Director of Financial Derivatives Company Limited (FDC), Mr. Bismarck Rewane, that banks may commence massive staff retrenchment in Q2 2016 due to the tough economy.
Rewane, who made this forecast in his firm’s projection for 2016, also stated that state governments would retrench a significant number of workers in the first quarter of this year. Bank workers, who spoke with New Telegraph in Lagos yesterday, confirmed that rumours were rife about impending mass layoffs and that employees were quietly bracing themselves for it.
An official of a midsized bank, who asked not to be named, said: “At the moment, everyone is scared because we do not know who will be affected when the exercise is carried out.
But it has become quite obvious that some people would be asked to go. Usually, the retrenchment takes place early in the year, either in January or February.”
She noted that in recent years, banks had been regularly downsizing their workforce as part of what they term “restructuring.” In a chat with New Telegraph, a financial expert and Principal Consultant, Henates & Associates, Mr. Henry Atenaga, said although the operating environment had been very difficult for banks, many banks would not take the decision to sack workers until their full year results were ready.
He said: “Yes, things are tough for the banks, but I think many of them would not want to take the decision to sack workers until their full year results are ready. “Currently, the results are being compiled.
It is when they see the results that the seriousness of the situation will really jolt them and they may then decide that they have no other choice but to reduce staff.
But remember it is not a decision that they would be happy to take because every bank wants to present the impression that all is well with it.”
Atenaga predicted that banks that were heavily dependent on revenue from Commission on Turnover (COT) charges may sack the largest number of workers.
He said: “According to the CBN, banks are expected to stop charging COT this year. Some banks depend heavily on the revenue they get from COT. I suspect that it is mostly these banks that will decide to downsize while they devise fresh means of earning revenue.”
When contacted, the President of the Association of Senior Staff of Banks, Insurance and Financial Institutions (ASSBIFI), Mr. Sunday Salako, said that the association did not have any information yet on the planned layoffs. He, however, acknowledged that he had heard of the speculated retrenchment, adding that ASSBIFI was on the alert for any development.
“We don’t have any information on the plan to lay off staff, but our people are on ground and we are monitoring things. You know layoffs are not something that can be done in secret. Even if you try to do it in secret, something will happen and it will be escalated.
“We don’t want to play up the issue yet so as not to give any bank management the idea that staff retrenchment is a way out of their current difficulties. They should not think of cutting jobs now because the staff contributed to banks’ growth when things were good.
Besides, the tough times are only temporary. It is not something that would last,” he said. A bank executive, who spoke with our correspondent under condition of anonymity, said that the tough times that the industry faced last year were likely to be a child’s play compared to what it will face this year.
He pointed out that the International Monetary Fund’s (IMF) recent prediction that oil could slump to $20 per barrel this year had made prospects for Nigerian banks this year worse. He said: “If the IMF’s prediction comes to pass, the impact on the industry will be devastating.
Banks are highly exposed to the oil and gas sector. But these loans were given out when oil prices were above $100.
Since June 2014 when the sharp decline in the price of oil started, many of these companies have begun to default on their loans. This has resulted in most banks having to restructure these loans.
But any further decline in oil prices as the IMF is predicting will clearly make the situation unmanageable and we could have another crisis triggered by a surge in non-performing loans (NPLs).” Indeed, in a recent statement, Fitch Ratings noted that Nigerian banks’ nonperforming loans have been rising over the past 12 months.
“We expect them to rise above the Central Bank’s five per cent of total loans cap, but to remain below 10 per cent at year-end,” the agency stated.
Also, analysts point out that banks are still reeling from the full implementation of the Treasury Single Account (TSA). It will be recalled that the policy led to the withdrawal of public sector deposits – a cheap source of funds for lenders.
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