COVID-19: Dealing with challenging times in Nigeria’s banking sector, By Zakariyya Adaramola

The world’s economy is facing a serious challenge as a result of coronavirus. Millions are losing their jobs as the pandemic takes a toll on almost everything. Nigeria is not spared as many informal businesses were forced to shut down amidst the pandemic. However, losses are yet to be put in figures, but they could be running into billions of naira, according to Dr Dele Ade, a Lagos-based economic expert.

The financial sector too is not immune to the coronavirus crisis as banks are forced to close some of their branches in the wake of the lockdown directives by the Nigerian government and the Central Bank of Nigeria (CBN), coupled with the ugly realities of crashing oil prices. This has led to a growing concern that some of the country’s biggest banks may have sacked many of their workers.  Although some of the banks denied this allegation, the rumour keeps resurfacing, almost every week.

Although Access Bank, for example, has repeatedly denied the speculation that it was sacking 75 per cent of its workforce and closing 300 branches across the country, many continue to believe it. But Ade said the news of the planned sack and closure of branches by Access Bank may not be true because the closure of any bank requires the approval of the CBN.

“But Access Bank has not applied nor obtained the approval of the apex bank for the closure of any of its branches as widely speculated. The bank has only suspended operations in some branches as directed by the CBN,” he said. He also said the bank wouldn’t have committed any crime if it had chosen to lay off some of its workers in the context of the COVID-19 crisis. “It had the opportunity to do so when it merged with the now-defunct Diamond Bank Plc, but it did not do it. Big companies all over the world are feeling the heat wrought by COVID-19,’’ he said. According to Ade, Access Bank’s records show it is in business for a long term and would need its thousands of employees to weather the storm. Information on its website shows that the bank employs 28,000 people in its operations in Nigeria, sub-Saharan Africa and the United Kingdom, with representative offices in China, Lebanon, India, and the UAE. Speaking at a recent meeting, Herbert Wigwe, the 53-year old Group Managing Director/Chief Executive Officer of the bank said, “There is no indication that Access Bank is facing distressing times, to the extent of laying off 75 per cent of its workforce. It recorded a profit after tax of N40.9 billion in the first quarter, ended March 31, 2020.” Wigwe said he had ensured that all employees of Diamond Bank were integrated into Access. “We are more concerned about commerce and conscience: the need to place a premium on profits and people,” he said. But the adverse impacts of the COVID-19 pandemic are no illusions, he added. He, however, said that in order not to let staff feel much financial impact, the bank would take a 40 per cent pay cut. “We should care for the people we lead and do so passionately,’’ he said. “We are also looking at a professional cut. I understand that is very tricky because it comes with pains. I will be the first to take the heat and I will take the largest pay cut, as much as 40 per cent. “Everybody may have to make some adjustments of sorts. We understand the difficulties people are going through but also understand the higher calling of creating an institution that can continue to provide for us. “When things improve we shall revert to normal. We understand the difficulties facing the people, but we have to protect our franchise,’’ he said at the virtual meeting Also, a top official of the Guaranty Trust Bank said they put their retrenchment plan on hold when the CBN intervened early this month. “We are not sacking our staff. The bank has since put some things in place to ensure that the pandemic doesn’t affect our operations and staff. We have stepped up our revenue generating drive and blocked many leakages”, the official, who preferred anonymity, said. Similarly, a senior manager in Polaris Bank headquarters told Daily Trust Saturday that they also shelved their plan to sack some staff after the CBN intervened. She said the bank was partnering with some startups, as well as small and medium enterprises in its quest to increase its revenue to meet its staff salary obligation. The manager, who did not want her name mentioned because she was not officially allowed to speak to the media, said the bank had also begun a new campaign to increase its customer base. But an economist, Dr Franklin Nnaemeka Ngwu, urged Nigerian banks to put on their thinking caps and innovate more in order to have their revenue increased. Ngwu, who is also an Associate Professor of Strategy, Risk Management and Corporate Governance, Lagos Business School and a member of Expert Network, World Economic Forum, added that the strategy of progressive firms was that of creative thinking and customer-led innovation, an area that Nigerian banks cannot be said to be doing very well. He said, “By innovation, I am not referring to only deployment of technology. I mean deep ideation and creation of products and services for sustainable financial intermediation and growth. Just to buttress the limited innovation of our banks, their revenues and profits come from both interest and non-interest services that are common to all banks. “In a country of about 200 million people and a banking sector since 1894 (over 120 years), all the banks can only boast of about 40 million customers, even with all the noise about financial inclusion. Moreover, even when some innovate, it is not really to provide any superior innovative services but mainly to make more money through many questionable charges.” There is no doubt that COVID-19 comes with many negative impacts on businesses, however, he said the doubt is if the banks are among the most affected, and if the impacts are so much to warrant the sack of employees just within a month of COVID-19. “I do not think so. With all the banks claiming to have good digital platforms, they offered most of their services during the COVID-19 lockdown, including both debit and credit transactions. Not only did transactions take place, a significant part of non-bank transactions interestingly moved into the banking sector due to the lockdown and social distancing. Moreover, he said, as the lockdown led to increase in data usage and entertainment services, most banks recorded increasing revenue and profits from selling the products and services of telecommunication and entertainment firms like the MTN and DSTV. It is, therefore, a bit difficult to justify the sudden decision to sack workers with COVID-19 as an excuse just within one month of the crisis. According to him, before COVID-19, most banks declared huge profits, even with an average cost-income ratio of about 65. “If the banks want to reduce the high cost-income ratio, they should not use COVID-19 as an excuse. What is required is creative thinking and innovation. While our banks are sacking their workers, another firm in Nigeria recently approved and paid the yearly salary increase to all their employees at the peak of the lockdown in April. Between the firm and Nigerian banks, who will achieve higher employee engagement and loyalty? And who will better stimulate the innovative capabilities of their employees for sustainable growth and profitability?’’ he asked. The national president, Association of Senior Staff of Banks, Insurance and Financial Institutions (ASSBIFI), Oyinkan Olasanoye, also faulted plans by some banks to retrench workers over coronavirus pandemic crisis. She said that due to the current world of work, all critical sectors of the economy needed a viable and modern collective agreement, coupled with the government having a social insurance system in place for all Nigerians. Also, one thing the ravaging pandemic has revealed, according to Barclays boss, Jes Staley, is the fact that having thousands of bank workers in big, expensive city offices “may be a thing of the past.’’ Staley pointed out that about 70,000 of Barclays’ staff worldwide are presently working from home due to coronavirus lockdown measures, leading the bank to rethink its long term strategy. So it is not just Wigwe that took proactive and pragmatic steps to remain competitive. To stabilise economies and stem job losses, governments across the world have announced a range of stimulus measures, such as payroll support to keep jobs, cash transfers and tax breaks. To this effect, the Federal Government of Nigeria has announced N1trillion stimulus package to bolster various sectors of the economy to counter the fallout of the pandemic. The CBN will provide N100b loan to health authorities as Africa’s most populous nation tries to contain the spread of the new virus, the apex bank revealed in a statement recently. The bank will increase efforts “in boosting local manufacturing and import substitution by another N1trillion across all critical sectors of the economy,” it stated. The regulator had also approved a one-year moratorium on all principal debt repayments from March 1, and reduced to 5 per cent, from 9 per cent, the interest rate on Central Bank intervention loans that are given directly to agriculture and commerce.

Source: Daily Trust

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