Banks’ Recapitalisation: NLC, Bankers Concerned After Job Losses in 2005, 2010

Several organizations such as the Nigeria Labour Congress (NLC), the Association of Senior Staff of Banks, Insurance and Financial Institutions (ASSBIFI) have voiced their concerns over job security regarding the new banks’ recapitalization as ordered by the Central Bank of Nigeria (CBN).

This follows reports that similar exercises in 2005 and 2010 resulted in the loss of 12, 000 jobs.

Recall that the CBN, under the leadership of Mr. Olayemi Cardoso, directed another round of banks’ recapitalisation last week making the third in the series since the advent of civil rule in 1999.

Under the new rule, the CBN gave two years for banks to meet a new capital base of N500 billion for international operations, N200 billion for national operations and N50 billion for regional operations and merchant banking licences.

The CBN, during the regimes of Professor Charles Soludo and Lamido Sanusi, conducted recapitalizations in 2005 and 2010, respectively

While Soludo’s recapitalisation policy reduced the number of commercial banks from 89 to 24, that of Sanusi reduced the banks to about 20.

During the two exercises, reports claim that no fewer than 5,000 workers lost jobs (direct employees) while over 7, 000 indirect staff engaged as casuals, contract and outsourced employees lost their jobs.

Speaking to Sunday Vanguard on the latest round of recapitalization, President of NLC, Joe Ajaero, said: “The policy of recapitalising the capital base of banks in the country is not a new one and we have all seen its consequences.

“The truth is that when the capital base of banks becomes eroded especially by the forces of foreign exchange which renders the capacity of banks to continue serving as major players in the international market and the domestic economy especially for an economy that is highly exogenously propelled, it becomes imperative that their capital base are shored up to be in sync with the objective socioeconomic realities.

“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.

“These had serious consequences for domestic prices of goods and services which shot up through the roof.

“The implication on all financial holdings in Naira is that their real value nose-dived to the extent of the inflation as unleashed by the policies. “What we saw during the last exercise was that many banks were unable to meet the new requirements within the required period while some were able to scale the hurdle.

“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.

“The implications of these for employment relations are many and varied. (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.

“Employers in the sector will seek cost-cutting measures which often begin with workers’ take home. Negotiation of terminal benefits and redundancies will take centre stage and will lead to severe grievances in workplace relations in that sector’’.

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

“However, it is important to stress that the need for recapitalisation is a product of ill-conceived policies of government thus government should ensure that it creates enough buffers for the banks to stay afloat so that businesses do not suffer including that workers do not lose their meagre deposits in the banks. Safeguards must be put in place to protect the poor as we know that the Nigeria Deposit Insurance Corporation, NDIC, provisions are grossly inadequate to ensure that the funds of small businesses and individuals are protected.”

On his part, President of ASSBIFI, Olusoji Oluwole, said, “The new bank recapitalization had come to stay and it is a good development for the sector and the economy.

“An increased capital base gives banks room to delve into bigger transactions locally and internationally and expand their capacity and offering.

“At moments like this, we usually expect banks to merge or be acquired which have implications on job security.

“We understand this and have expressed our concerns to the CBN, Ministry of Labour and Employment and our labour centre.

“As events unfold we will have a clearer view of what is to come especially with the two-year period of compliance given by the CBN.”

SOURCE: Vanguard