By Dr. Ugoji Egbujo
The Banks are kicking. The National Employers Consultative Assembly is furious. Apostles of free market are seething. The federal government has directed the banks and telecoms companies to suspend planned massive staff retrenchments. The political opposition has been stirred. To hell with ‘command and control’ economic polices, and tyranny! Foreign investors are cringing. Many critics are excited, there is a mockery feast going on. Buhari and his men are incorrigible. He is perhaps a closet communist. His iron fists will ruin the economy and break the country.
It runs against the tenets of free market to dictate to companies how to run their business. In any case it is perhaps mutually destructive for a government to prevent drowning companies from downsizing. Investments cannot flow into an economy that lacks autonomy. Rampant arbitrariness creates uncertainty which suffocates businesses. But wait a minute.
Free market hates government interventions. And would prescribe that badly run banks and companies be allowed to die. That would create a level playing field and reward prudence. But in 2009 the banking system was terminally afflicted. Banks had cooked books, traded bogus shares, engaged in unhealthy rivalry and brought the system to ruin. The Nigerian people through the government came to the rescue of drowning banks. Nigeria was not alone. America had let Lehman Brothers go down and learnt painfully that the system was too closely integrated to allow more failures.
So the whole of the world tore the veil that kept government away from interfering with private businesses. And lent help to sick companies whose death would inflict widespread pain. The world learnt that in some circumstances, strict observance of free market rules may not serve the greater good.
Nigeria created AMCON which bought off toxic debts from Nigerian banks and the banking system was revived. AMCON has also saved the aviation industry from collapse by transfusing private airlines from the public blood bank. Governments should ordinarily not interfere with the running of private companies. But when a set of companies have sought and benefited from such interventions, they have lost some sovereignty. Banks lack the moral authority to rely on free market rules to resist minimal government interference in an emergency. If the government saved the banks to protect public interest , the government can make demands on the banks to protect public interests under emergency situations.
The nation faces an imminent recession. The economy has contracted. The immediate future looks bleak if it is not reflated. Government wants to stem job losses in the interest of the greater good. And it wants banks to do with less profit and keep some staff who have become temporarily technically redundant. Why are the banks obstinate? The banks are ruled exclusively by the share holders interests to the detriment of the other two stakeholders – the employees and the larger society.
Since the events of 2008 global economic collapse where public funds were used to rescue private entities, governments have stepped up regulatory regimes. But that has not deterred a debate on the skewed weighting of stakeholder interests by large companies. Large corporates place absolute priority on shareholder interests to the detriment of the interests of the society that may be called upon when it falls into severe distress. Some have argued that since the systems have become so tightly integrated that some companies cant be allowed to fail by the society, those companies must in the interest of equity cater proportionately more for the needs of society. Banks and Telecoms companies in Nigeria can spare a few billions and keep people at work during these difficult times.
The case this government should make now is that since suspension of the retrenchment of workers would serve both public and employee interests in the short term, the banks should consider a temporary suspension of retrenchments. Since the government has once rescued the banks and since the government may yet again rescue the banking system ,whose collapse we cannot tolerate , then the banks owe the public tangible appreciation. Since these responsibilities have been forced on the government , the government has earned the moral authority to make certain demands on banks in the interest of the greater good.
In any case it is in the interest of the banks that the government’s efforts at preventing a collapse succeed. The government hasn’t had need to rescue the telecoms sector but that prospect is foreseeable. Just like the airlines , the government cannot allow a complete collapse of the telecoms sector. Companies that enjoy such potential protective privileges must know that to whom so much is given, so much is expected. The government and the banks can sit and negotiate a mutually beneficial calibration of the intervention.
The government projects that the economy will be back on its feet in two years. So the government can ask the banks to push up their Corporate Social responsibility votes to absorb the cost of a suspension of the scheduled retrenchment. The government should cede the discretion to the banks while maintaining firm background pressure. Banks in Nigeria are still declaring ,comparatively, healthy profits. Large companies must be wary of leaving the government and the people reeling in moral indignation.
However the sort of military pronouncements coming from Dr Ngige paints the picture of a frustrated belligerent government . Threats to revoke licenses are uncalled for. And such pronouncements will only reinforce the negative Buhari stereotype. But more damagingly, I would argue, it negatives government moral authority to put pressure on the banks. It’s no use engaging in legal disputations when political pressure and moral suasion can yield benefits. Ngige wants to rely on section 20 of the Labour act to arm twist the banks . That would mean a catastrophic failure of diplomacy.
Yes, the workers have rights that must be respected in a redundancy situation. And NECA is wrong to imagine that since the workers belonged to no unions they are not protected. The fact that most of these banks prevented the workers from forming unions cannot preclude them from the right of collective bargaining in redundancy situations as provided by section 20 of the Labour act. The minister is right to insist on companies following right procedures in declaring redundancies to preserve industrial peace.
But rather than dwell on redundancy protocols, rather than run the risks of protracted resistance by labour unions, the banks and government should find short term creative ways of preventing job losses. The people have bailed out banks and large companies, it is time for the large companies to bail out the people by shelving retrenchments and making do with less profits for two years.