The worsening economic situation in the country has adversely affected the fortunes of operators in virtually all sectors of the Nigerian economy; hence many companies are now sacking their workers as a means of survival
It is not difficult to tell that all is not well with many organizations and companies both in the public and private sectors. The sustained falling price of oil (from $110 per barrel mid 2014 to $35 late last week) in the international market, led to dwindling oil revenue, which accounts for over 80 per cent of government revenue. This development has since thrown the Nigerian economy into turmoil, and many companies and government agencies are finding it difficult to stay afloat, as government is the biggest spender in the economy.
Indeed, the falling price of oil has generated tension among oil workers, who fear that they could be sacked any moment as many oil companies are negatively impacted. Ritch Wingo, director, Advisory, Oil and Gas, PriceWater House Limited, recently warned at the Offshore West Africa Conference in Lagos, many oil and gas companies were going to embark on mass sack of workers. “Right now, a lot of companies are trying to lay off workers due to falling oil price. It is going to be pretty rough in a couple of months to come. The best thing to do now is to go back to the banks to talk to them on how to restructure our finances so that people will not default. If oil price continues to fall, investors are not going to invest again,” Wingo noted.
As at last year, Schlumberger Limited, American multinational oil service firm, lined up approximately 9, 000 workers from its global operations for sack due to lower oil prices and the expected cutbacks in exploration and production spending in the course of the year. According to the firm’s fourth quarter 2014 earnings report, the company expected to record a $296 million charge associated with the layoffs. “In this uncertain environment, we continue to focus on what we can control,” the company said.
The National Union of Petroleum and Natural Gas Workers, NUPENG, moved swiftly to prevent a similar scenario in Nigeria by calling on the federal government not to allow Chevron and Shell Petroleum Development Company, SPDC, to extend its planned sack of about 18,500 workers globally to Nigeria. In a statement by Igwe Achese, its president, the union said it was worried and concerned about the sack threat of about 18,500 workers, though, globally in the two oil companies, saying the planned retrenchment would be monumental.
Describing it as a sack too many, NUPENG was concerned that Nigerian workers in the companies would be affected as the oil giants have cited dwindling oil prices in the international market for the planned sack. NUPENG wondered why the companies should contemplate retrenchment “when they have fully divested from onshore oil fields,” stressing that it would “amount to derailing the efforts of the government to provide jobs for Nigerians.” Rather than sack Nigerians, NUPENG suggested that the oil giants should cut cost by employing Nigerians in positions where expatriates hold sway and earn “ten times what our people are getting.” Should the federal government fail to stop the plan of the oil companies to retrench Nigerians, thereby further bloating the unemployment market, NUPENG has warned that it might be forced to embark on industrial action.
But the imminent sack of oil workers did not come as a surprise to operators and stakeholders across the sectors in the economy. When it became clear in 2015 that some of its members would lose their jobs, the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, raised an alarm, warning that it would not tolerate indiscriminate sack of its members under the guise of falling oil prices in the international market. Olabode Johnson, its president, said the union would jealously guard the rights of workers in the sector in the face of the current realities. PENGASSAN raised the alarm after its earlier warning that companies, especially petroleum companies, had planned to retrench staff. Then, the union had lamented that non-core employees of oil firms in the country might be asked to quit their jobs, if the fall in oil prices persisted. “The effect might be severe if it continues because some employers are already complaining that they may need to shed weight if the situation persists. Of course, it will affect contract staff, if the slump persists,” PENGASSAN said then through Babatunde Oke, its Media Officer. The fears are gradually becoming manifest.
The downturn in the oil sector spells bad news to government, particularly state governments, many of which depend heavily on revenue from the federation account for survival. Due to the dwindling oil revenue, their allocations have equally reduced over time, making many of the states to be unable to meet their obligations to workers. In Edo State for instance, government is said to have sacked almost all those working in the Youth Empowerment Scheme, YES, programme, throwing over 10,000 youths back to the labour market. In Imo State, reports have it that about 2,000 civil servants have been booted out, though governor Rochas Okorocha insists that he only suspended the workers. But even if that was the case, the “suspended” workers are not receiving salaries and cannot also make claims to gratuity.
With the threat by state governors to cut down the minimum wage or on the alternative, retrench workers, it is likely that the list of the unemployed would further increase within the year. This has been a point of discord between the state executives and the Nigeria Labour Congress, NLC. In the opinion of the organised labour, the N18, 000 minimum wage is due for upward review, having been in operation for four years, as the international labour organisation, ILO, stipulates. While that may not be out of place, the governors are saying that with the current economic situation in the country, they cannot sustain the current minimum wage and so are calling for its downward review. And if the labour union insists that the minimum wage be retained, the governors are saying that they would be forced to trim their workforce so as to be able to pay. Whichever way the argument goes, it is certainly not in the interest of workers.
As Ismail Bello, acting deputy general secretary, NLC, has argued, it is ridiculous for any governor to say that he cannot pay his workers. Though he admits that the economy is not looking good, he said governors should look inward and device means of sustaining their economies. For one, he said they should adopt the strategy being adopted by the federal government by exhuming all monies buried through corruption by individuals. Again, he said they should also look for other means of creating wealth to execute their projects rather than rely on the federal government for assistance. “Any governor that proves himself incapable of paying his workers is not fit to be in office and should be replaced with more capable hands,” Bello said.
The dwindling revenue from oil has also negatively affected the capacity of the federal government to implement some projects, leading to the laying off of workers by many contractors in the construction industry. Bello told the magazine last week that many construction companies have suspended several ongoing projects while contractors have deserted the sites. Since the dawn of 2014, the beehive of activities that characterised the constructions sites of Julius Berger, RCC, Setraco and many other construction companies across the country, had slowed down. The lull in the industry, which has about 130 registered members of the Federation of Construction Industry, FOCI, the magazine’s investigation revealed, follows the huge debts they incurred from bank loans to execute projects, for which government at all levels have failed to honour the terms of the contracts.
For instance, the federal government alone owes Setraco over N80 billion for projects already executed. The same goes for Julius Berger, which is owed over N70 billion. While those could be said to be big companies, the story is not different for smaller construction firms. For instance, S&M Nigeria Limited, a Nigerian company, is also owed over N800 million. Solomon Ogunbusola, President of FOCI, told the magazine then that government owed the construction industry over N600 billion.
As a result of the huge deficit in their pockets, construction companies downed tools and stopped work at different project sites across the country, as they could not continue paying salaries and allowances in the face of dwindling finances, and the result is the massive retrenchment of workers, skilled and unskilled.
Indeed, Bello said there is no sector of the Nigerian economy where workers are not threatened. The implementation of the Treasury Single Account, TSA, by the Muhammadu Buhari government, which mandates all Ministries Departments and Agencies, MDAs, to remit revenue into a single account to checkmate leakages in government organizations and other policies, unleashed a chain of reactions now threatening the jobs of many workers in the private sector. At least N1.2 trillion was transferred from the vaults of the banks to the Central Bank of Nigeria, CBN, and over 20,000 accounts of the MDAs with the banks were closed. The significant depletion of liquidity of the banks left them with no choice than to embark on mass sack.
Even before the TSA came into operation in April 2015, one of the new generation banks axed over 1,000 of its workers. It was gathered then besides the job cut, the bank also resolved to reduce the number of new branches to be opened last year. There were also reports that the realignment of the bank’s operations also led to its decision to shelve some projects and sponsorship programmes for third-party companies that did not impact directly on the fortunes of the bank. Five months after that decision by the bank, another new generation bank followed suit by sacking over 200 of its workers, mostly those at the top. A source close to the bank said the sack was inevitable as the bank was becoming top heavy, with many of the managers earning so much money enough to support business growth plans.
Before it was also reported that Access Bank, which acquired former Intercontinental Bank in the wake of the bank consolidation policy, got rid of about 1,600 of its workers across the nation. Mainstreet Bank, one of the three nationalised banks, was also not left out, having reportedly sent packing over 400 of its workers.
In January, one of the banks floated by a celebrated financial management expert laid off over 700 of its workers as one of the measures to restructure the financial institution. The affected workers were said to have resumed their office as usual but were told to report to the Human Resources Department where they were subsequently handed their sack letters. But that was not all. The chief executive of the bank is said to have also closed some of its branches across the country and has also merged some departments. For instance, Business Banking department was reportedly merged with Retail Banking resulting in the sack of most senior staff in the Business Banking department. For those who were spared by the company, it is also not rosy, as some of them have also been demoted. All this, reports said, were done in a bid to restructure and re-stabilize the bank to prevent collapse.
Last week, there were reports that the federal government policy on foreign exchange, forex, might affect the jobs of those who work at the different bureau de change, BDC, outfits across the country. It was reported that despite the lifeline given to the BDC operators recently by the CBN which said they could source forex from oil companies and the Nigerian National Petroleum Corporation, NNPC, the 2,786 operators in the country might still sack over 21,000 of their workers nationwide. The development followed CBN’s stoppage of direct sale of forex from banks to the BDC operators.
Government no doubt, has cogent reasons for the TSA policy. But as the organised labour has warned, it would be anti-people and counter-productive for the policy introduced to correct some anomalies in the system to end up causing job losses to Nigerians. While addressing journalists on the issue last October, the National Union of Banks, Insurance and Financial Institutions Employees, NUBIFIE, urged the Federal Ministry of Finance to work out modalities on the implementation of the TSA that would not lead to job losses in the financial sector. They urged the federal government to think of better ways of creating jobs rather than creating a policy that would lead to job losses, causing additional burden to the economy already burdened by unemployment.
Like the banking sector, the telecommunications industry is also suffocating under the weight of the struggling economy. When MTN Nigeria, a major mobile network provider, acquired Visafone, the only surviving Code Division Multiple Access, CDMA, operator in the country, in early January, it laid off about 2,000 workers of the acquired company, paying them three months salaries as severance package. According to reports, the South African company would have retained at least 50 per cent of the sacked workers if the economy were clement. But with the N1.04 trillion fine imposed on it by the Nigerian Communications Commission, NCC, that hope was lost. Some of the workers who lamented that they had put in up to 10 years in the service of the company, said it was sad that they were unceremoniously dismissed.
But that was not the first time that MTN had sacked workers. In 2014, the company announced that it had relieved 252 of its engineers of their jobs. The company explained then that the affected engineers were sacked following service contracts it entered with global telecommunications solutions providers, Ericsson and Huawei.
The contract, according to the company, would see Ericsson and Huawei manage MTN infrastructures, including base stations while MTN focused on its core business of providing mobile services. But unlike its decision to do away with the staff of its newly acquired company, Visafone, the MTN, which explained then that it was facing revenues stagnation challenge as well as increased operating expenses, said
some of affected workers were absorbed by Ericsson and Huawei.
In March of the same 2014, Etisalat Nigeria reportedly sacked about 2,000 of its staff, citing changes in the company. The company, which stated that the services of the sacked workers were no longer required, said in a statement, “We would like to reaffirm that, as responsible corporate citizens, we remain committed to growing and developing our people in line with our core values.”
The current sack of workers by the MTN came on the heel of the same strategy by Airtel Nigeria. Last November, the telecoms company reportedly sacked some of its workers. The mobile network operator said the downsizing was part of its move to reposition the business and “reinforce its competitiveness in the market place, adding that those affected had been “handsomely compensated.” A statement issued by Emeka Oparah, the company’s director of corporate communications, said in part: “… One of the key objectives is to create a high performing organisation, which satisfies the needs of all of our stakeholders, especially our customers, as we step into the next growth phase of our operation.”
The manufacturing industry appears to be worse off. In addition to the disturbing poor electricity supply and absence of critical infrastructure, the sector now has additional headache of high import tariff, high exchange rate, which has pushed up the cost of importing raw materials for operations. This, according to Bello, is because most of the materials used by manufacturers are imported and following the persistent devaluation of the naira, it has become difficult for some manufacturing companies to keep up the tempo. Some of them, he said, have adopted the wait and see approach, while operating skeletally whereas those who do not have the strength to wait have resorted to either scaling down or shutting down their operations. In 2015, there were reports that over 100 Nigerians in the employ of Nigerian Bottling Company, NBC, were sacked owing to the harsh economic environment.
The economic crisis Nigeria is witnessing did not come by chance. Some analysts said it has been anticipated since 2014 when oil prices first nosedived, forcing sharp drops in accruals to foreign reserves and, subsequently, devaluation of the naira, which served as the straw that broke the camel’s back. What many perhaps did not envisage was that the economic crisis would hit so hard that labour would become the major casualty. The concern is that things may get tougher, if nothing is done to stem the tide of retrenchment. It would certainly shoot up the unemployment rate, which is already alarming.
Nigeria, Africa’s most populous country and its largest economy, has 24 per cent unemployment rate, with youth unemployment estimated at over 54 per cent. Some experts argue that given Nigeria’s penchant for poor record keeping, the figure could be as high as 37.7 per cent and this is based on the reality on ground. For instance, it is estimated that the over 300 universities, polytechnics and colleges of education in Nigeria churn out one million graduates annually. It is a popular opinion that because the country’s economy is not robust enough, it cannot absorb even 20 per cent of the products of the institutions and given the present scenario, it is not in doubt that economy is in trouble. Many have linked some social vices in the country such as armed robbery, kidnapping, child trafficking and cultism to high rate of unemployment and with more workers being laid off, more crisis, observers say, could be expected.
When Buhari assumed office as president in May 2015, hopes were high that things would change for the better. Such thinking followed the President’s promise to create jobs, stabilise the naira and make the economy more robust. “But since he came to power, things appear to be getting worse,” remarked Uduak Ighodalo, a businessman who said the high exchange rate has made “nonsense” of the naira. “When Buhari came to power, I remember that naira was still about N200 per dollar and people were saying that naira would appreciate with his coming. But look at it now. Dollar is about N300 now and this has adversely affected my purchasing power and makes you keep explaining to customers each time they come to buy something.” What you buy for N100 today would increase to N150 tomorrow and by next week; it has gone up to N200. Some customers think that you are just out to cheat them and that is not good in business and for them to understand, you have to explain over and over that exchange rate is high,” Ighodalo lamented.
The economic policies put in place by government may be adversely affecting Nigerians. But as Bello said, it is expected that with the implementation of the budget, things would change for the better. But for the economy to be healthy, he also said government should introduce “sustainable industrial policy.” Again, he said there should be a clear policy on patronage of locally produced goods by Nigerians. Bello, who noted that the country also gaped for breath like this in the 80s during the time of Structural Adjustment Programme, SAP, said, “if the army and all the agencies that use uniform should buy their materials locally and sew them locally, the agriculture sector and the textile industry would come alive.”
Michael Ikenna, a lawyer, corroborates this view. Among other policy options, he said government should support the Small and Medium-sizes Enterprises, SMEs, to retain existing jobs as well as create new ones. He listed critical areas of support to include funding and capacity building. He said government should accord higher priority to investments in infrastructure to reduce the high infrastructure deficit and moderate the cost of doing business in the economy. Bello, who also said the current crisis stemmed from Nigeria’s over dependence on oil, said that if the economy is diversified so that other resources the country is endowed with are fully harnessed, the economy would rebound in no time.
While Nigerians still wait for such expected economic rebound, they have called on the federal government to do all within its power to ensure that the already bad situation does not get worse through the ongoing retrenchment in key sectors of the economy.
Additional Report by Mark ItsiborFollow Us on Social Media