RECESSION: Banks cut salaries to stem workers' sack

03-10-2016 

 

As the current reces­sion takes a heavy toll on the operations and profits of many Nigerian banks, some of them have resorted to salary cuts – to avoid the outright sack of their workers.

At the last count, 11 of the 22 banks in the country have adopted the measure not just to remain afloat but to avoid in­flicting further pains on their workers and families by disen­gaging them.

Investigations by The AU­THORITY in the banking sec­tor confirmed that more than half of the 22 banks in the coun­try chose the salary cut option as the best alternative to laying off their workers due to the eco­nomic crunch.

The management of the banks took the measure “after due con­sultations” with all the key stake­holders in the industry, sources in­dicate.

The salary slash, according to The AUTHORITY’s findings, range between 20 to 40 percent of the affected workers’ former earn­ings, depending on the financial strength of each of the banks.

The banks, however, termed the new arrangement as “tempo­rary” as they assured their em­ployees that their full pay will be restored as soon as the situation normalises.

But the affected workers have described the development as “strange.”

In a chat with The AUTHOR­ITY, some of the workers, who spoke to this reporter on the con­dition of anonymity, said that they have taken the policy as an una­voidable pill they must swallow, adding that a slashed “salary is better than none, especially now that things are not normal in the country.”

An insider in one of the banks said: “This is the situation we have found ourselves in and we are aware that other banks have equally adopted the same meas­ure as if they held a meeting on that but this is better than throw­ing us into the labour market now that the economy is really down.”

The worker, who has put in 16 years in the banking sector, de­scribed the new condition as “a pill we must take or a sacrifice if you like and we don’t have a choice be­cause we are not unionised here and nobody will fight for us if we resist the condition.”

Another official (a lady) in a new generation bank, who also sought anonymity, described the situation as “really bad. I can tell you that the situation is really bad in this bank and we are just pray­ing daily to retain our jobs.”

She said that “what we collect after the pay cut is 30 percent of our former earnings and it is very depressing but we understand the situation and have to take it like that.”

According to her, some work­ers who are not comfortable with the arrangement have sought to know if their full entitlements will be paid immediately, if they opt for voluntary retirement.

“If we are sure that such is possible, some of us may decide to go.”

The AUTHORITY’s inves­tigation also revealed that some banks are still bent on retrenching some of their workers before the end of the year despite the Federal Government’s intervention in the mass sack of workers by the banks.

A general manager in one of the banks said that “unless the sit­uation in the banks improves,” the sack of workers will continue.

He said: “Some banks are con­sidering seriously closing some of their branches that are not meet­ing their targets but still incur heavy expenses on overheads and when this is done, where do you redeploy the affected workers than to lay them off? But the Cen­tral Bank of Nigeria (CBN) must be consulted before this measure is taken.”

Early this year, three banks (names withheld) were reported to have sacked over 3,000 workers in addition to those laid off by oth­er banks before the government intervened to stem the tide.

The banks that took such measures attributed the develop­ment to the economic problems they were facing, which, they not­ed, became worse after the Treas­ury Single Account (TSA) policy was implemented by the govern­ment.

The AUTHORITY further gathered that the economic down­turn had also led to a high rate of non-performing loans regarded in the banking sector as “bad debts” and also liquidity concerns in the sector.

According to our investiga­tions, four banks (names with­held) recorded a combined prof­it loss of N17 billion in the first quarter of 2016 (January-March), an indication that the full-year re­port may be worse.

Apart from the TSA poli­cy, which removed huge public funds from deposit banks to the CBN vault, other issues like the drop in oil price, which reduced foreign exchange earnings to the country, added to the worsening plight of the banks.

The results of the perfor­mance of the 15 banks quoted on the stock market showed a de­cline in profit in their 2015 re­port. However, a few of the banks, namely: Access, Zenith, UBA and GTB recorded huge profits last year.

On this year’s first quarter re­port, 13 of the 15 banks quoted on the stock exchange recorded a combined profit before tax of N135.36 billion compared with N148 billion reported in the cor­responding period of 2015.

The banks also posted a com­bined profit after tax of N116.6 billion in the first quarter of this year as against N126.4 billion re­corded in the first quarter of last year.

This situation, however, shows that the condition may not be as bad as the banks are paint­ing the picture to be.

Commenting on the develop­ment, a former top banker, Ishi­aku Chuntai, told The AUTHOR­ITY in his office in Abuja that the situation is not cheering and “this is a reflection of the economic sit­uation in the country.”

He maintained that in spite of the salary cut measure, “some banks may still sack workers un­less the situation gets better soon.”

He called on the Federation Government to “return the idle money at the CBN to the depos­it banks and monitor closely how Ministries, Departments and Agencies (MDAs) utilise their funds to avoid corruption which has been the case in the past.”