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NGIGE AND THE PRESSURE ON BANKS
Monday Editorial
The Minister of Labour missed the point. Banks are private companies and they can hire and fire
The harsh economic environment in the country may already be having a significant impact on many of the banks with the non-performing loans jumping from around N600 billion last year to N1.4 trillion as of April 2016. In percentage terms, the NPL ratio has shot up to 10 per cent from around 3.6 per cent last year, which is well above the regulatory threshold limit of five per cent. This is a serious situation that should concern the authorities, especially given that the development has led to mass retrenchment in many of the banks.
However, against the backdrop that the banks are commercial entities, we consider the directive by the Labour Minister, Dr Chris Ngige, that they should stop laying off staff not only ridiculous but a mere attempt at grandstanding over a rather serious issue. “The federal government gave the licences to the banks to operate and if its directives are not adhered to the licences will be withdrawn if the need arises,” said Ngige at the 105th session of the International Labour Congress (ILC) in Geneva, Switzerland. Not only is the statement reckless, the minister was arrogating to himself the power he does not have since it is the Central Bank of Nigeria (CBN) that can grant bank licences and withdraw them.
We therefore align ourselves with the position of the Nigeria Employers’ Consultative Association (NECA) that Ngige’s directive was not well-informed, illegal and counterproductive. Besides, to the extent that banks are private companies, no minister can tell them who to hire and who not to fire. He may choose to create jobs for those being sacked by the banks as minister of labour and employment but Ngige has no business asking banks not to retrench since they are not charities.
However, there are also issues with banking operations in Nigeria that deserve attention. On the issue of loans repayment, for instance, it is important that the regulatory authorities pay closer attention to banking supervision. Loans don’t just go bad overnight. A proactive regulatory regime should detect early warning signals and ensure there are mitigants in place. Another issue has to do with the policy of this administration and its unintended consequences. Removing trillions of naira from commercial banks and locking them up in the CBN in the Treasury Single Account (TSA) has not helped the operations of the banks.
However, there are also issues with banking operations in Nigeria that deserve attention. On the issue of loans repayment, for instance, it is important that the regulatory authorities pay closer attention to banking supervision. Loans don’t just go bad overnight. A proactive regulatory regime should detect early warning signals and ensure there are mitigants in place. Another issue has to do with the policy of this administration and its unintended consequences. Removing trillions of naira from commercial banks and locking them up in the CBN in the Treasury Single Account (TSA) has not helped the operations of the banks.
Therefore, we believe there is a need to rethink the TSA, especially given that the wholesale and quick implementation introduced a shock therapy of unimaginable proportions. As things stand today, the TSA may serve government public accountability ends but economically, it has proven to make little sense. In an economy where government is the principal earner of revenue, collecting all public funds and locking them up in the CBN is tantamount to misapplied management at a time like this.
To be sure, we have no problem with the implementation of the TSA that has helped to check the criminal diversion of public funds by unscrupulous public officers while also instilling transparency and accountability in the system. But it is also obvious that it has not served the people, especially considering that the same government is tinkering with investing a part of the N5 trillion pension funds of Nigerian workers in infrastructure rather than have it kept with the CBN. We therefore believe that the funds in the TSA can also be placed in the commercial banks while the CBN should be able to assume responsibility for the behaviour of the banks.
To be sure, we have no problem with the implementation of the TSA that has helped to check the criminal diversion of public funds by unscrupulous public officers while also instilling transparency and accountability in the system. But it is also obvious that it has not served the people, especially considering that the same government is tinkering with investing a part of the N5 trillion pension funds of Nigerian workers in infrastructure rather than have it kept with the CBN. We therefore believe that the funds in the TSA can also be placed in the commercial banks while the CBN should be able to assume responsibility for the behaviour of the banks.
In all, we do not believe issuing threats, as Ngige did, is the solution to the problems that have forced the banks to retrench workers. The federal government, through the regulatory authorities, will have to come up with incentives and improving the economy that will make them keep their staff and possibly hire more. That is the way to go.
