Banks face human capital crisis amid loss of 8,574 jobs in 2020

By Charles Abuede

• Experts say low capacity‭, ‬incompetence could stifle industry’s growth potentials
• Contract staff most hit in lay-offs‭, ‬accounts for 12.2%

In the face of lingering global pandemic, high unemployment rate of 33 per cent, Nigerian banks culled 8,574 jobs in 2020 to add to Nigeria’s covid-19 crisis and rising rate of joblessness. This is the highest rate of retrenchment in the sector since the last quarter of 2015 when over 3,200 bankers got relieved of their jobs. This figure signifies an 8.3 per cent year-on-year decline in the number of banking sector staff strength to 95,026 in the fourth quarter of 2020, down from 103,610 in the same period of 2019, according to recent Q4’ 2020 banking data published by the National Bureau of Statistics (NBS).

At the start of 2020, prior to the pandemic, alleged plans by some major financial institutions in Nigeria to layoff over 2,000 banking staffs filled the air, but this was later dispelled by the big banks who refuted claims. The impact of the pandemic brought ill-luck to some staff as the government-imposed restrictions, and limitation of customers from the banking halls, made it expedient to retrench some members of the banking workforce, as the banks could no longer afford the monthly overheads. 

The Central Bank of Nigeria (CBN), after a special meeting with the Bankers’ Committee, halted the planned lay-offs by the banks after considerations of the impending implications on the Nigerian economy, amid the pandemic. Despite the warnings by the apex bank against the sackings, the banks took haircuts during the third quarter of 2020 when the economy was already reflating with an easing of lockdown restrictions.

A major talking point for analysts on the issue is the widening hole in manpower, which tells how deep the human capital need of the industry is, thus posing more challenge to the looming human capital crisis, while these banks grapple with adequacy of skills.

Sources in some of the banks, who spoke to business a.m. anonymously, outlined the advancement in technology which has shown some loopholes in the abilities of these workers to meet up targets. The pandemic, which-led-to-the-work from home model, has also given these banks reasons to let go of workers in a bid to cut costs.

According to an insider source, “Well, I’ll say the pandemic was one of the reasons most staff were laid off. Also, some of these big banks were not able to pay their staff anymore, so they had to lay them off, thus forcing one person do like three people’s job.”

Another source from one of the big banks explained to business a.m. that the fact that the value of online and digital payments and transactions in the past few years have recorded massive increases, physical transactions such as cheque payments have witnessed reductions. As a result, across-the-counter transactions have reduced drastically as more people are getting more active in mobile and digital banking. Due to this factor, some banks found it necessary to shrink their workforce. 

“The bank is a money generating organisation and wouldn’t want to spend more on salary payments in that respect when the income level is decreasing.

“The level of staff competency in today’s banking sector is more stringent as banks are competitive financial institutions vying to draw and sustain customers’ patronage. Bankers who fail to meet up with required goals/targets or fail competency tests at different levels risk losing their positions. More so, some staff was appointed on a contract basis and banks often terminate such contracts when the worker fails to meet expectations or when the need to lay off staff becomes imminent.

“Increased operating and overhead expenses deepens banks’ expenditure and in situations where overheads close in on the bank’s profits, measures to curb such losses could include laying off workers whose positions do not make relevant revenues for the bank,” the source disclosed.

A research economist, who commented on the issue, said that the haircuts taken by Nigerian banks during the year under review were not really thought in circumspect. He stressed the attendant effects will be the rate of unemployment in the country and the inability of these institutions to train their staff to the level they ought to attain with the rightful skill power and development and in turn, mitigate the looming human capital crisis in which unemployment is creating in Nigeria today.

Essentially, the outbreak of the COVID-19 pandemic has had a devastating effect on the labour market as companies, across some selected sectors, that were most hit, had to trim their staff cost to boost profitability and remain in business.

“My thinking is that banks were not really affected the most, as seen from their bogus 2020 profit declaration) as they were quick to adapt to the changing business environment by leveraging on technology such as online banking, mobile banking etc. The laying off of staffs by banks during that pandemic could be a perfect opportunity to actually lay off staff (in view of the increasing use of technology) and then blame it on covid-19. More so, a bank like Access was already looking at how to prune its staff strength, after the acquisition of the defunct Diamond Bank and Covid-19 was the actual culprit to blame to achieve that objective,” he said.

The Nigerian banking sector has always exhumed a high level of resilience in its operating capacity and its ability to contribute to the economic growth and development of Nigeria’s economy. Worthy of mention is its level of competence and financial soundness which when compared to some banks in other climes have arguably proven that its solidity has over the years been lauded by both local and international stakeholders.

However, it is worrisome regarding the perennial human capital crisis in the Nigerian economy which is partly triggered by the rising rate of employee disengagements. A breakdown of the data from NBS shows that there was a 4.4 per cent year on year decrease to 17.381 senior staff by the end of 2020 while bank junior staff numbers fell by almost 6 per cent year on year to 37,590. The contract staff were the most hit of the lay-offs as over six thousand contract staffs were shown the door. This represents a 12.24 per cent year on year decrease to 39,798 workers during the last quarter of 2020 from 45,350 in the corresponding period of 2019.

The apex bank had reportedly written to banks and other financial institutions on the levels of staff competence as part of skill assessment tests, with sources disclosing that the banking industry in Nigeria still suffers from the issues of capacity and competence, which is capable of stifling growth potentials of the industry. Meanwhile, experts have highlighted that the application of artificial intelligence (AI) in credit risk assessment and management; loan portfolio management and other process-driven activities will bring about new opportunities in customer care and services for banking staff while addressing new areas of operations in digital banking.

As stressed by various sources familiar with the issue, room should be given to skill and human capacity development within the organisation as a way to mitigate the problem of skills adequacy and underdeveloped human capital within the workplace; given that machines are expected to perform more current work tasks than human by 2025, this would have an impact on the global workforce immensely.