Chris Ngige has a tall ambition. Nigeria’s minister of labour wants to retain the existing jobs in the country if the economy cannot create new ones. But the news from the economy is all about retrenchments.
Globally, the banking industry is notorious for hacking down jobs. Bank of America sacked 6, 000 workers last yearIn Nigeria, Ecobank recently sacked more than 1,000 workers. Diamond Bank sacked 800. Skye Bank sacked hundreds too. There are fears that First Bank has penciled down at least 1, 000 for the same purpose. In the last three months about 5, 000 workers have lost their jobs in the banking industry. More heads are bound to roll.
Ngige does not want to hear that. If he was minister of labour in the defunct Soviet Union, he would have barked instructions and the banks managing directors would simply fall into line. But Ngige is minister of labour in an open market economy. When an employer can no longer pay the bills, he closes shop.
That is what the banks are trying to avoid through what they derisively tag “right sizing”. Ngige does not want to know how the banks pay their workers. All he wants is for them to keep all their workers. He first directed the banks to stop the spate of retrenchments. When the banks shunned the directive from a man whose ministry has no business issuing orders to them, the minister responded with threats to withdraw licenses of defiant banks.
Ngige is a medical doctor. Doctors are known to be totalitarian in their management of patients. They brook no rivalry. Ngige is authoritarian in his handling of the labour crisis in the banking industry.
The banks are just unlucky to be the only ones taking the minister’s pounding. Retrenchment is the only news from the private sector at the moment. Many firms are just not retrenching; they are shutting down. Last month a leading lubricant production firm closed shop and sent 127 workers to the labour market. The company could no longer raise dollars to import raw materials. Last year a big plastic company in the same conglomerate that owned the defunct lubricant firm, shut down its operations and threw 130 workers into the labour market. The plastic company could not raise N500 million to buy a power generating set that could sustain its operations.
From one conglomerate, almost 300 people have lost their jobs to scarcity of foreign exchange and epileptic power supply in the last few months.
Those are the basic things government should supply to empower the private sector not only to retain existing jobs but create new ones.
Ngige cannot guarantee those basic requirements because of the activities of the gunmen in the Niger Delta. Unfortunately, he wants banks to retain all their employees. The option to what the banks are doing that is irritating the labour minister is what is happening in other arms of the private sector: total shut down. An economy that does not allow banks to take steps necessary to remain in business is inadvertently courting bank failures which is even more dangerous.
A bank failure takes down even more jobs than ordinary retrenchment.
The current spate of retrenchments was foisted on banks by government’s policy. Everyone, except the banks, is applauding the federal government’s Treasury Single Account (TSA). It has halted a senseless situation where banks mobilised government funds at zero deposit rate and lent it back to the same government at 14 per cent.
Ironically, TSA is one of the reasons for the mass sack in the industry.
It has robbed some of the banks of 40 per cent of their capacity to create risk assets. Besides, deposits have plummeted by N1.03 trillion in the last one year. Consequently, most of the banks have closed some of their branches.
The next reason for the massive retrenchment in the banking system and the entire economy is the acute shortage of forex. Banks are servicing clients who could no longer raise forex to import raw materials to produce and sell to service their debts. Some firms have toiled unsuccessfully for three months to raise $100, 000 at N320 to the dollar for raw materials import.
Others have defaulted in their dollar-denominated loans and are consequently calling banks’ bluff. Those who raised dollar-denominated loans at N160 to the dollar now have to pay back at N200 to the dollar. In a few weeks’ time they might have to pay back at N300 when the Central Bank of Nigeria (CBN) rolls out its flexible exchange rate. With forex scarcity starving manufacturers of imported raw materials, they have no way of paying back the loans.
Banks are sitting on a mountain of non-performing loans (NPL). The ratio of NPLs now stand at 10 per cent as against the prudential limit of five per cent. Everyone in the industry is cutting cost and wage bill from closed branches and units presents a tempting target.
Rather than forcing banks to carry excessive wage bills at a time when forex scarcity and power failure have combined to reduce their income, the federal government should frontally tackle the two major problems now grounding the economy. The option to that could be a calamitous systemic failure in the industry.
