Concerns Mount Over Job Losses as NLC Lists Implications of Banks' Recapitalisation

• Anxiety has risen of fears of imminent job losses as part of the implications of ongoing bank recapitalisation exercise
• The NLC has sounded an alarm that the exercise will lead to job losses and loss of gratuities and income for the workers
• It added that during the previous recapitalisation processes, numerous banks struggled to meet the new criteria

Legit.ng journalist Victor Enengedi has over a decade's experience covering Energy, MSMEs, Technology and the stock market.

The Nigeria Labour Congress has expressed concerns regarding job security amidst the recent banks' recapitalisation initiative mandated by the Central Bank of Nigeria.

This apprehension stems from previous instances in 2005 and 2010, where similar actions reportedly led to the termination of 12,000 jobs.

Notably, the CBN governor, Mr. Olayemi Cardoso, has issued directives for another round of banks' recapitalisation, marking the third such occurrence since the onset of civilian rule in 1999.

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Under the new guidelines, banks are given a two-year timeframe to meet increased capital requirements, set at N500 billion for international operations, N200 billion for national operations, and N50 billion for regional operations and merchant banking licenses.

Previous recapitalisation exercises led to job losses

Under the leadership of Professor Charles Soludo and Lamido Sanusi, the Central Bank of Nigeria implemented recapitalisation efforts in 2005 and 2010, respectively.

Soludo's policy saw a reduction in the number of commercial banks from 89 to 24, while Sanusi's further reduced the count to approximately 20.

Throughout both initiatives, it is reported that at least 5,000 direct employees lost their jobs, alongside over 7,000 indirect staff employed as casuals, contractors, and outsourced workers.

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NLC warns against more job cuts

Addressing Sunday Vanguard regarding the latest round of recapitalisation, Joe Ajaero, President of the NLC, remarked that the practice of increasing the capital base of banks in Nigeria is not novel.

He said:

“We ask ourselves, is there a need for the recapitalisation policy? Yes, there is but who created the environment that undermined the capital base of the banks?

“It is the government’s economic policies, especially the twin policies of hike in the price of Premium Motor Spirit, PMS, and the floatation of the Naira."

Ajaero further mentioned that numerous banks struggled to meet the new criteria within the stipulated timeframe during the previous recapitalisation process, while some managed to overcome the challenge.

He said:

“Those that were unable to scale the hurdle were either bought by other stronger banks or went into mergers to shore up their capital. Very few did not find suitors and went under as a result."

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He went ahead to list some of the implications of the recapitalisation exercise, which includes:

(1) Acquired or merging banks will mean the loss of jobs to many, especially those crossing from the old entities to the new.

(2) Those who didn’t have suitors will go under so, will not only lead to job losses but will also lead to loss of gratuities and income for the workers.

(3) The general implication for the economy is that the capacity of the economy to absorb new entrants into the job market will be reduced, leading to greater unemployment.

(4) We are also going to experience increasing tension within the Banking Industrial relations sphere.

Ajaero further commented that employers within the sector would likely pursue cost-saving measures, typically starting with reductions in workers' take-home pay.

Negotiations regarding terminal benefits and potential redundancies will become prominent, potentially leading to significant grievances in workplace dynamics within that sector.

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He added:

“If not well managed, this may lead to greater industrial tension in the country as the labour centres get involved."

Five banks that would meet minimum capital base

In related news, Legit.ng reported that analysts and finance experts have supported the CBN's move to review the capital base of banks operating in Nigeria

In his remarks, Prof Uche Uwaleke supported the recapitalisation of banks, calling it a positive step.

He claimed it would also potentially strengthen the nation's financial system and help the stock market.

Source: Legit.ng