One of the bitter pills of the prevailing economic downturn afflicting the country, as a result of the devaluation of the naira, and by extension, the plummeting oil prices in the global market, is the gale of sack currently sweeping across different sectors like banking, manufacturing, allied industries, among others, reports Ibrahim Apekhade Yusuf
Times are really hard. In the over 11 years of my working career as a management accountant, I’ve never been so disillusioned in my life. I received my last pay cheque last October because my company is in a pretty bad shape, financially. Even as we speak, there is no hope that things will improve anytime soon. Already, the management considers retrenchment as the one and only option to avoid going completely bankrupt in the coming months. I know it’s just a matter of time before the few of us left would be shown the way out.”
The foregoing anecdote by a staff of a publishing company, in Lagos, who asked not to be named, because he doesn’t want to bring his employers under public scrutiny, not only speaks volume, but largely reflects the fears being expressed by many workers out there, who are faced with the clear and present danger of losing their means of livelihood – work-a-day jobs!
Their fears are not completely unfounded. Findings by The Nation revealed that at the last quarter of last year, perhaps in anticipation of the economic crunch, a number of organisations had taken far reaching steps, including cutting down on excessive wage bills, among other incidentals, just as some prevailed on some members of staff to consider the option of early retirement.
Crux of the matter
A cross-section of analysts who attempted a prognosis of the crisis noted that the falling oil prices at the global market may have begun to take its toll on Nigerian companies.
The price of Brent, which hit $115 per barrel in June 2014, has witnessed a steeping decline to less than $50 per barrel, fuelling concerns that the world may be in for the worse recession in years.
In Nigeria, especially, the devaluation of the naira by the Governor of the Central Bank of Nigeria, Godwin Emefiele, after admitting that a plunge in world oil prices and dwindling dollar reserves were making it difficult to defend the value of the currency, is also partly to blame for the parlous state of the economy, analysts have argued.
Sectors worse hit
The sector worse hit by the gale of sack, The Nation gathered, is the manufacturing sub-sector.
Workers in the food and beverage sector are badly affected by a mass sack, as companies struggle to stay afloat in the face of skyrocketing cost of wheat, induced by the sliding value of the naira, which is inching to an all-time low of above N228 to the dollar as at the weekend.
Specifically, over 100 Nigerians in the employ of Nigerian Bottling Company Plc (NBC), part of the Coca-Cola Hellenic Bottling company (CCHBC), have been slated for retrenchment by the beverage manufacturer, it was learnt.
A source in NBC told The Nation that some staff members had already received their sack letters.
The source, who pleaded anonymity, said the affected workers cut across all sections of the establishment. Other workers who constitute the company’s workforce of about 6,000 are now losing sleep, as about 1, 800 workers of Coca-Cola worldwide have been lined up to join the labour market when the company concludes its restructuring exercise.
The 1, 800 workers would be the largest to lose their jobs since 2000 when Coca-Cola sacked as many as 5, 200 workers.
The company, which employs about 130,600 people around the world, including a group of about 13, 000 corporate employees who are primarily located in Atlanta, its headquarters, said employees had already been notified about the job cut, a development analyst see as a move to cut running cost.
The job cuts, it was learnt, have been on the drawing board, as the beverage manufacturer reported a 14 per cent fall in earnings for the July to September quarter last year and a dismal revenue growth.
For workers at Flour Mills Nigeria Plc, the fear of job loss looms, as no fewer than two million direct and indirect jobs in the sector are said to be on the line because of increase in the price of wheat and Value Added Tax (VAT).
Group Managing Director/CEO, Paul Gbededo, raised the alarm that because of the current high price of wheat and the government’s plans to increase VAT from five per cent to 10 per cent, the jobs of over 125,000 direct employees and 1,800,000 indirect jobs in the sector were on the line.
The rich also cry
Wait for this: one of those worst hit is Aliko Dangote, Africa’s richest businessman! The fall in the naira, coupled with falling stock prices, has erased more than $7.8 billion of his fortune since February, when Forbes locked in the values for its annual ranking of the world’s billionaires.
As of Nov. 7, Dangote was worth $21.6 billion, $4.4 billion more than now.
Expectedly, The Nation gathered that the loss of fortunes by Dangote may have had an adverse effect on his business interests nationwide as the management has taken certain measures to mitigate the losses.
One of these measures is to downsize. Some staff, The Nation gathered, were asked to go as part of the cost-cutting measures.
A source who spoke under anonymity, as he was not authorised to speak on behalf of the management, confided in The Nation that some members of staff were retrenched across the board in the different branch networks of the company.
Bank workers taste bitter pill
Despite assurances by the CBN governor that the banks have a clean of health, the reality is that majority of the banks have had to downsize in the last few months as a result of the biting economic crunch.
A source at one of the new generation banks, who would not be named, confided in The Nation that the difficult regulatory environment currently experienced in the banking sub-sector has taken its toll on the financial sector this year, a development that has compelled a number of banks to commence the process of cutting jobs and put on hold branch expansion plans till further notice.
Investigation by The Nation revealed that while some of the banks laid off some workers late last year, others asked their employees to go last month, just as many have outsourced most of their job functions to third-party companies.
For instance, Skye Bank Plc announced that it had transferred its tellers, drivers, security personnel and other support staff members to three outsourcing firms.
Hundreds of the bank’s workers are said to have been affected by the development.
According to a very reliable source, the outsourcing companies appointed to take over the employees are Optimum Continental Services, Strategic Outsourcing Limited and Integrated Corporate Services Limited.
However, the bank gave the assurance that the outsourcing firms would engage the affected employees under the same terms and conditions as they were employed by the financial institution.
Investigation by our correspondent showed that the decision of the banks to reduce their workforce and branches was meant to assist them to cut costs in the face of a looming decline in their profitability this year.
It would be recalled that Unity Bank Plc had in July last year announced the disengagement of 170 of its workers as part of efforts aimed at repositioning it for effective service delivery.
Findings revealed that the latest threat of disengagement had to do with the need to realign for their operations for tougher 2015, especially as the monetary policy environment continues to get tighter.
Some of the regulatory measures introduced by the CBN aimed at protecting the economy, according to findings, have started affecting the banks’ profitability, with major impact to be felt this year
Also, in a bid to halt the sliding naira, the CBN had in December stopped the banks from keeping any of their funds in foreign currencies. It also said dollars bought from it must be utilised within 48 hours, adding that the actions were aimed at stopping the banks from speculating on the exchange rate.
Experts said the recent regulatory measures would have major negative effects on the banks this year, adding that they were already feeling the effects of previous actions by the CBN, especially the increase in public sector CRR, the Asset Management Corporation of Nigeria’s levy increase, and the gradual removal of certain bank charges.
Global rating agency, Fitch Ratings, and other international and local research firms had late last year predicted that Nigerian banks would witness a fall in profitability this year.
Oil and gas sector
The oil sector is no exception. The Nation learnt that since mid year 2014 when the crisis started, the blood pressure of workers in the Nigerian oil and gas industry has been on the rise for fear of possible retrenchment. Such fears are not without justification, particularly in view of earlier warning by the Director, Advisory, Oil and Gas, PriceWater House Limited,
Mr. Ritch Wingo, that oil companies may be compelled to lay off workers due to the drop in oil price in the global market.
A recent survey also found that oil and gas managers are planning to scale back their hiring plans this year due to declining oil prices and an uncertain economic environment.
It was further learnt that oil companies are cutting their capital expenditures (capex) and work programmes for this year as crude oil price remains below $50 per barrel for close to two months, it was learnt.
The implication of these cut downs, according to the Managing Director of Seplat Petroleum Plc, Austin Avuru, is that as the oil firms cut their capex, they are also reducing future oil production.
Avuru told The Nation that the stable long term average price of crude should be within $70 and $80 per barrel, noting that if the price is at $40 per barrel, a number of projects will be cancelled and work programmes will be reviewed to reflect the current realities.
He also confirmed that Nigerian companies will cut down their workforce to ensure that their capital expenditures (capex) and operating expenditures (opex) remain within the generated revenue from the current oil price. However, he assured that Seplat will not sack its staff as a result of oil price slump.
He said: “A few things will normally happen when oil sells at $40 per barrel. A number of projects will be cancelled. Every company in Nigeria today is reviewing its capex spend and its work programme. There will be projects that will be cancelled in deepwater, shallow water, swamp and even some high capex projects on land. In the near term, if the low price persists and the capex cut continues, it will affect production in the future. When you cut down capex today, you are inevitably cutting production in the future. And once the capacity production gets lower and demand doesn’t fall with that production, there will be pressure on price.”
Civil servants’ tales of woes
Although the mass sack for now affects workers in the private sector, the fear is that it’s only a matter of time before it gets to the public sector.
A good number of states across the federation owe between six-three months salaries just as workers in the federal civil service are not spared.
Already, some state governments are contemplating reducing their workforce but are only holding back because of the general elections. The state governments are said to be treading carefully to avoid a backlash, as any sack might make them incur election loses.
Recall that Stephen Oronsaye Panel had recommended that some MDAs should be scrapped or merged with others.
The Nation learnt that some MDAs are already working out modalities preparatory to disengaging some of their staff from service.
In line with civil service rule, some are currently undergoing one form of course or the other on post retirement.
Labour spoils for war
The Nigeria Labour Congress (NLC) has threatened fire and brimstone should workers be sacked. NLC outgoing President, Comrade Abdulwaheed Omar, warned the federal government to take sustainable, viable and proactive steps to address the consequences of the falling crude oil prices instead of punitive measures against ordinary Nigerians especially workers.
He advised against consideration for rationalisation of staff, adding that labour will support government initiatives to tax the rich through luxury taxes.
Job cuts inevitable
However painful a job loss is, it is the last resort for any employer. This is the view of the Director-General, Nigeria Employers’ Consultative Association (NECA), Mr. Segun Oshinowo.
According to him, the high exchange rate leads to high cost of raw materials such that manufacturers can no longer meet up with their capacity utilisation, then it will lead to layoff of workers. He said this is because it will reduce the companies’ cash inflows.
The President, Lagos Chamber of Commerce and Industry (LCCI), Alhaji Remi Bello, is also on the same page with Oshinowo. Some companies are downsizing their operations and laying off their staff to stay afloat due to reasons bordering on high cost of production and unfriendly government policies.
To many analysts, the surest way to get the country back on track is conscious efforts by government at all levels to apply prudence in the management of resources, and genuinely develop other streams of income rather than overreliance on a monoculture economy, which is sadly the case.
