The Central Bank of Nigeria and the Bankers’ Committee have agreed to halt the retrenchment of bank staff in the country. The decision applies to both part-time and full-time workers.
This was disclosed in a press release issued by Isaac Okoroafor, the CBN’s Director of Corporate Communications, on Sunday.
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According to Mr. Okoroafor, the agreement was reached after a meeting of the Bankers’ Committee, a body comprising of officials from CBN and Managing Directors of Deposit Money Banks (DMBs). They had convened on Saturday, May 4, to assess the effects of the COVID-19 pandemic on the industry.
Okoroafor said the committee had considered the costs incurred by the banks due to the disruptions caused by the pandemic. They had decided to stop banks from taking up mass retrenchments as a cost-cutting alternative.
He explained that the decision was taken to “help minimize and mitigate the negative impacts of the COVID-19 pandemic on families and livelihoods.” Banks will also have to gain the express approval of the CBN before embarking on mass lay-offs.
The statement comes as banks have begun showing signs of stress amid the COVID-19 pandemic. Many commercial banks have had to shut their branches in the key cities of Lagos and Abuja for more than a month. This may have cost them billions of naira in unremitted deposits and other transactions.
But an even greater concern is their exposure to bad debt, especially from the oil sector. The coronavirus pandemic has contributed to a fall in crude oil prices, which has, in turn, forced the petroleum sector to incur massive losses.
Businesses from that sector have taken out large loans from local banks. There are fears that they will be unable to repay those loans, and that many banks will struggle to survive the impact that the defaults will have on them.
Last week, rumors of an impending lay-off of workers at Access Bank began circulating. A report from Bloomberg had claimed this as well, citing anonymous sources from the institution.
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It will be recalled that in 2016, the CBN had taken a similar action to restrict banks from sacking their workers. That happened in circumstances similar to the present situation—oil prices had fallen, triggering a recession that threatened the very existence of several financial institutions.
While the CBN does wield a considerable degree of power over the banks, it’s not yet clear how willing they will be to adhere to its latest directive, especially in the long run. The final outcome could depend on the severity of the difficulties they face, and the sort of sanctions that the apex bank is willing to impose on erring banks.
Featured image source: Vanguard
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