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More bank workers heading for labour market as CBN orders MFBs to cut cost

*To announce comprehensive reforms

By Babajide Komolafe & Amaka Agwuegbo

More bank workers are set to join the labour market as the Central Bank of Nigeria, CBN has directed microfinance banks to reduce staff and other overheard cost.

Meanwhile the CBN said that  it would soon announce comprehensive reform programme for the subsector.

“I am worried about micro finance banks. Right now we are working on the entire regulatory framework of macro finance. We are working on the licensing framework,  we have started a process of certification. We are starting a process now where anybody who is the managing director of a Microfinance bank have to go through the certification. And after the process, if you are not certified, you cannot run a macro finance bank.

We are looking at the framework for the regulation and supervision. And we will come out with a guideline,” said CBN Governor Mallam Lamido Sanusi in Enugu last week.

CBN Governor Lamido Sanusi
CBN Governor Lamido Sanusi

Sources at a meeting between the apex bank and chief executives of microfinance banks (MFBs) held last week in Lagos confirmed to Vanguard that MFBs were directed to adopt cost cutting measures and stop competing with commercial banks in terms of flashy cars and grandiose buildings.

One of the chief executives at the meeting told Vanguard “We were directed to “develop how cost can be cut in the industry so as to improve operations and services. This can be done by reducing areas of overhead by pruning down on expenses like flashy cars, big buildings, employing OND holders instead of graduates, and the likes. The operators of these banks are to comply with this directive; else, they would be digging their graves because the CBN really means business.”

“This is a step in the right direction because we have seen the mistakes we have been making. Most of us have offices and cars like we are commercial banks but we now see that it is an unwise decision. The issue of having excess staff was not our fault as we were only following the CBN directive. But soon, when you walk into our various banks, you would be seeing less number of staff,” said another  chief executive of a microfinance bank who spoke on condition of anonymity.

The CBN,  according to a source at the meeting, told the chief executives, “Microfinance banks shouldn’t be seen as competing for visibility, finesse and exquisite cars because the purchase of these would require using depositors’ fund. Also, MFBs should not mismatch assets and liabilities. Most times, when MFBs get deposits of 30 days tenor, they end up using it to create loan of 180 days or one year tenor. Thereby, they end up using short term liabilities to create long term assets.”

Confirming this, the  Director, Other Financial Institutions Department, OFID, Mr. Femi Fabamwo while briefing journalists on the purpose of the meeting said, “The aim of the meeting is to encourage them to adopt low cost profile so as to be alive to their obligations and to desist from mismatching assets and liabilities.

“The aim is to reduce the rate at which some of these banks fold up because it seems like most of them are competing with commercial banks in terms of flashy cars, gigantic structures, branch expansion, and number of staff, among others. If they can maintain low cost, they would be able to improve their operations.”

The implication of this directive according to the  chief executives is that lots of microfinance banks will embark on massive staff retrenchment and  while some branches would be closed.

There are more than 1000 microfinance banks in the country with majority located in the urban centers with each microfinance bank employing at least ten permanent staff and ten temporary staff for marketing. With the directive of the apex bank each bank might reduce staff strength by at least five staff implying that not less than 5000 staff would lose their jobs in the subsector.

Even before the directive, some microfinance banks due to problem of liquidity have had to close some of the outlets and shed staff.

It would be recalled that the CBN gave a similar directive to the eight troubled banks instructing them to reduce staff strength by 30 per cent. Consequently, three weeks ago, Intercontinental Bank sacked about 50 top management staff from the rank of Assistant general manager upward.

The following week the bank sacked another 1,500 staff. The other troubled banks though yet to announce a major staff retrenchment exercise have been systematically sacking staff hiding under one guise of the other.

The orgy of staff retrenchment is however not limited to the troubled banks. In October three banks sacked 1000 staff within a week, with one of the biggest old generation banks leading the pack by sacking 485 in one day.


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