Lenders to resort to salary cut as CBN, Bankers’ Committee suspend lay-offs

Deposit Money Banks (DMBs) may resort to cutting down the salaries of workers as the Central Bank of Nigeria (CBN) and the Bankers’ Committee on Sunday suspended plans by banks to lay off staff.

A statement signed by isaac Okorafor, director, corporate communications department of CBN, said the a special meeting of the Bankers’ Committee was convened on May 2, 2020, to further review the implications of the COVID-19 pandemic on the Nigerian banking industry.

The Committee particularly deliberated on the issue of the operating costs of banks in view of the disruptions emanating from the global economic difficulties and decided that in order to help minimize and mitigate the negative impact of the COVID-19 pandemic on families and livelihoods, no bank in Nigeria shall retrench or lay-off any staff of any cadre (including full-time and part-time).

Also to give effect to the above measure, the express approval of the Central Bank of Nigeria shall be required in the event that it becomes absolutely necessary to lay-off any such staff.
“The Central Bank of Nigeria solicits the support of all in our collective effort to weather through the economic challenges occasioned by the COVID-19 pandemic,” the statement read.

Reacting to the development, Ayodeji Ebo, managing director, Afrinvest Securities Limited said, “I think banks will have resort to cutting down staff salaries since they are no longer allowed to sack staff”.

He said they will still be able to achieve their cost cutting strategy in view of expected lower revenue especially interest income. However, we expect to see increasing adoption of E-Banking post COVID-19 which will increase banks income on E-channels while impairment charges is expected to surge.

Uche Olowu, outgoing president and chairman of council, Chartered Institute of Bankers of Nigeria (CIBN), said the banks have to cope although they will encure costs.

He said it’s not a new thing as the regulator had directed the banks to seek approval before laying off more than five staff.

Access Bank Plc on Friday signaled plans to cut salaries to avoid job losses as a lockdown to contain the coronavirus hampers the operations of Nigeria’s biggest lender, according to people with direct knowledge of the matter.

The reductions are expected to start from May unless business conditions improve, said the people, who were briefed on the matter during a conference call and asked not to be identified because they’re not authorized to speak publicly. Some management will get as much as a 40% decrease, they said.

Nigerian banks are facing the threat of rising bad-debt levels as a crash in oil prices and the risk of a naira devaluation coincide with the Covid-19 pandemic that has shuttered businesses.

Access Bank, which acquired rival Diamond Bank Plc last year, had 6,898 permanent staff at the end of 2019, according to a presentation on its website. The acquisition partly contributed to a 31% increase in operating expenses. Personnel, recruitment and training costs account for more than a third of overheads after the deal boosted employee numbers and resulted in “wage harmonization” across the businesses.