December 7, 2015

Oil crash: Retrenchment is no solution —Okwuosa

By Clara Nwachukwu

Retrenchment of workers as the first option of coping with the current oil price crash as many companies are doing, may not be the best as this will only heat up the polity the more with attendant increase in crimes and restiveness.

This is even as the price sump is anticipated to linger longer than expected between six months and a year or more, if current over supply of the oil market continued.

Rather than laying off workers, the Group Chief Executive, Oilserv Group, an indigenous services company, Mr. Emeka Okwuosa, suggested that companies should adopt more creative ways of handling the challenges of a low oi price regime.

Speaking recently with journalists in Lagos, Okwuosa said: “I believe strongly that trying to cut cost by reducing staff strength is the worst thing that can happen to any economy. This is because more people will be thrown into the job market; crime will increase, desperation will increase.”

Since the price slump set in, thousands of jobs have been lost. Operating companies all over the world across all sectors and value chain have responded differently with a view to coping with the challenges including laying off staff, cutting down costs and budgets, suspending investment decisions and a host of others

Apart from retrenchment, he disclosed that some companies have also slashed salaries, saying: “Some companies have gone to the extent of bringing workers together to say: ‘Look this is realistically what we have, can we cut down the salaries temporarily, so that everybody can get something across board. And we will maintain everybody there and work together to see how we can increase our intake.”

He noted that “There are many ways to do that it is a matter of understanding between the companies and the workers. But reducing staff strength is the worst thing to happen and whenever it can be avoided should be avoided.”

Impact of slump

Okwuosa disclosed that the price slump has not only led to huge operational losses but also seen the loss of about 50 percent of industry activities.

According to him, “To calculate what it translates into in terms of billions of dollars, requires some works and it requires some scenarios and picking information from different entities. What is important is that activities have dropped and will still continue to drop if oil price does not rebound.

“I’m saying clearly that I don’t see the oil rebounding even in the next six months or one year. If you analyse what is happening, you will find out that except we have a major crisis in the world that will create distortion in price. If you look at the current situation, stable to say; and marry this with demand and supply, we have a higher potential for oil to further drop. This is because if Iran is able to solve its problem with the rest of the West, you will expect more oil to come into the markets.”