To enhance shareholders value and stay above water amid sinking company profits and other macro-economic challenges, Deposit Money Banks (DMBs), like a good number of other firms, are looking to cut down on expenses and shore up ailing profits.
Staff downsizing has been increasingly used to achieve this, which is why the profitability and value of bank shares may have come under significant threat following the ‘no retrenchment’ directive by Chris Ngige, Nigeria’s labour minister.
Ngige, last week Friday, issued a directive to financial institutions to suspend staff retrenchment, which is fast becoming the low hanging fruit to offset economic headwinds in the country.
The “right-sizing exercise,” as it is called, has left thousands jobless, and seems poised to flirt with unemployment rate in Africa’s largest economy. This sits oddly with policy makers and salary earners in the country.
“Following spate of petitions and complaints from stakeholders in the banking, insurance and financial institutions,” said Ngige in a statement, Friday, saying, “I hereby direct the suspension of the ongoing retrenchment pending the outcome of the conciliatory meetings in the industry.”
According to the minister, “all stakeholders in the sector will be meeting with government on July 2 to work out an amicable solution.”
Q1 2016 Unemployment Watch Report from the National Bureau of Statistics puts latest unemployment rate figures at 12.1 percent (31.2% using previous NBS methodology) from 10.4 percent in Q4 2015.
No less than 5,195 staff members have been laid off from the banking sector in the months through 2016, BusinessDay calculations show.
“The rightsizing was a core strategic exercise in line with the bank’s growth objective,” said Diamond Bank on its website, noting, “The reductions will help the company’s drive to optimise cost and enhance value for shareholders.”
Diamond Bank fired 200 workers, only last week, who failed to meet the lender’s basic minimum performance standards.
This has compounded the ever-rising unemployment rate in e.180 million Nigeria, as the country was unable to create the 1.5 million jobs, within Q1 2016, required to keep the unemployment rate constant at the 10.4 percent recorded in Q4 2015.
“I lost my job in March and it was no surprise, because I saw it coming,” said Tunde Oni, a former bank staff in an interview with BusinessDay. “Before my batch of 50 job cuts, 150 staffs had been sent home. Like most of my colleagues, I’m yet to find my feet, after working 10 years in the banking sector.”
Current bank staffs may have been given a chance to draw breath after months of aggressive job cuts, with Ngige’s directive, at least till next month.
“In this wise, all the retrenchments and redundancies done in the last four months and all proposed ones should be put on hold pending the outcome of the proposed stakeholders’ summit for the banking, insurance and financial institutions’ employers and employees in July,” Ngige said.
Earlier before the release of their 2015 audited results, a number of banks issued profit warnings citing spike in impairments particularly in the energy sector, macroeconomic challenges faced by most economies and the effect of lower crude oil prices have negatively impacted expected revenue growth.
The challenge of meeting overheads forced the hands of banks to adjust by way of cost cutting, readjusting priorities and rightsizing organisational productivity relative to declining income streams.
