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Contract staff rise to record high 46,235 across Nigerian Banks

The latest data from the National Bureau of Statistics (NBS) reveals that Nigerian banks now have a total of 46, 235 contract staff members as at Q1 2019. This compares to 45,238 in Q4 2018 and 32,013 in the first quarter of 2018.

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Contract staffing in Nigeria Banks, Nigerian Banks, Number of contract staff across Nigerian banks drop by 3,083, biggest in 4 years  

The latest data from the National Bureau of Statistics (NBS) reveals that Nigerian banks now have a total of 46, 235 contract staff members as at Q1 2019. This compares to 45,238 in Q4 2018 and 32,013 in the first quarter of 2018.

The numbers: There has been an upsurge in the bank staff strength in the last five years and it is rising by double digits.

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  • Contract staff has risen by 44% year on year as more Nigerian banks increasingly rely on outsourcing for core banking operations.
  • Contract staff now make up about 44% of total banking employees
  • Total bank employees rose to 105, 017 a 0.33% rise compared to the immediate last quarter.
  • This compares to 17% year on year employee hire for the banking sector. There was a 6.36% uptick in senior staff hires.
  • Essentially, Nigerian banks are hiring more contract staff compared to full staff

What the numbers tell us

Banks are increasingly relying on contract staff to perform daily operations. From a mere 20,237 in 2017 contract staff has more than doubled both as a percentage of total staff and in absolute terms.

Why do banks hire contract staff? 

Financial expert and CEO, AfriSwiss Capital Assets Management Limited, Kalu Aja, stated the following;

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“It cost banks less to employ casual staff, and I don’t think the trend will affect the banking industry…the procedures are being automated so less human input. also means human capital needs a higher skill base to stay employed. Also, Banks are not violating any laws, the workers don’t work for the bank…..but for the outsourcing company. So, the outsourcing company gives them terms and conditions.”

Similarly, the Chief Economist for Businessday, Nonso Obikili, gave further analysis thus;

“Contract workers are cheaper and easier to fire which is the preferred option for banks. The rising unemployment means the power dynamics between banks and labor has titled towards banks and you can see that in the numbers. It’s not because banks are “evil” but they have serious cost constraints and loan books that are on average not really growing. So they have to look at all options to cut costs. Also, it’s not a “threat to the sector” whatever that means. It’s just a thing.”

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Also weighing in, financial expert and Founder of Nairametrics, Ugodre Obi-Chukwu, explained it in details;

“With the increasing aid of computer Programmes and applications, bank jobs over the years have turned very routine and requiring less skill. Semi-skilled jobs often attract low wages and banks see this as an area of cost savings. Most banks’ jobs are especially at the operational level and can be performed routinely by employees with minimal soft skills. This has also come at a time where banks are increasingly looking for ways to cut their cost to income ratio targeting overheads such as employee cost.”

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The bottom line

With improved technology across core banking operations, banks will continue to increase its pool of contract staff. The implications should be positive for banks who are seeking improved profitability. However, it has its obvious downsides;

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  • More fresh Nigerian graduates face a bleak future especially those seeking a future in banking. You will need to be exceptionally good to get a non-contract job.
  • This also has negative consequences on youth migration out of Nigerian. Hundreds of thousands of Nigerians are seeking a better life in countries like Canada and the United States as quality jobs become fewer.
  • Nigerian tax authorities should also be worried about flat tax revenues particularly from the banking sector.
  • The banking sector represents a huge chunk of employees in states across the country. With 44% of staff being contract, tax receipts are expected to be thinner.

Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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Around the World

Who will ruin the OPEC+ party?

Russia has always been the black sheep in the OPEC+ family as they tend to ever deviate from consensual commitment concerning the oil market.

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OPEC+

The stage is set for OPEC+ to virtually meet on the 4th of June to discuss the extension of output cuts. The previous agreement on curbs resulted in a historic reduction of 9.7m barrels per day. Compliance has been commendable even to the point where some nations started shutting production before the effective date. The meeting in April was an emergency meeting after the diplomatic intervention by Donald Trump, who needed to save the energy industry in the United States.

This week’s meeting does not have any dramatic buildup to it (although the date has been brought forward to factor certain fundamentals). Still, there is a consensus or belief that the meeting will be successful, which is why prices have soared in the last couple of days. On Tuesday, Oil prices closed in on three-month highs because of the positive anticipation that OPEC+ producers would conclude in the extension of the production cuts at the forthcoming meeting. Brent Oil broke the $39 range, which has not been feasible since March.

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READ ALSO: Subsidy and PIB

But energy analysts and traders familiar with the history of OPEC meetings know very well that surprises and disagreements can spring up during the sessions and can negatively affect prices. To recall the last two meetings, the first meeting in March that led to the crash of prices from $50 to $32 after the discord between Russia and Saudi Arabia were Russia did not believe cuts were necessary to salvage the demand destruction caused by the coronavirus. The second meeting, which is the more recent, featured a Mexican standoff were Mexico would defiantly not accept their part in the global cuts. It took efforts by Trump (again) to agree to shoulder some of the cuts imposed on Mexico.

Skeptics believe Russia might be this week’s party pooper. Russia has always been the black sheep in the OPEC+ family as they tend to ever deviate from consensual commitment concerning the oil market. On Wednesday, Oil was observed to retreat by more than 4%, after reports suggested that Russia was mulling over easing production cuts as planned in July. Russian Minister, Novak expressed how the country expects global supply and demand to balance in June and July. This optimism is shared amongst Russian industry players who have felt the pains of output cuts, especially producers who must maneuver shutting down many wells without causing damage to the oil fields.  To be fair, Russia is responsible for about a quarter of the total OPEC+ cuts and prices at these levels still negatively impacts the Russian budget.

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READ MORE: Global oil market to re-balance in 2 months’ time

Although scaling back curbs is line with the OPEC+ deal and demand picking up globally as expressed by the Russian Energy Minister is true, it would be a classic tale of Russian Roulette if countries ease back on production cuts. The market demand must fully recover. There is still a shortage demand for consumption for jet fuel as airlines are not operating at normal levels, with experts saying it would take years before the airline industry recovers. History suggests we should be cautious with Russia. Moscow is solely interested in increasing market share and winning its veiled rivalry with U.S shale oil.  In the short-term, Russia’s defiance in February is why we are at these levels.

It is no surprise that Saudi Arabia Crown Prince Mohammed Bin Salman and United States President Donald Trump individually have had calls with Russia’s President on the need for coordination and cooperation in the oil markets days before the OPEC+ meeting. It seems that these discussions have been positive, and prices have reacted in this manner. Head of Oil market analysis at Rystad Energy, Bjornar Tonhaugen affirmed that “at this stage, there are two only variables that can significantly move prices, which are “Hints on the direction at this meeting and the outcome, and the rate of the shut production’s reactivation.”

READ ALSO: Ajaokuta’s completion to kick off as Russia provides funds

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Oil Bear traders would be monitoring this meeting; any sign of disagreement would be treated with selling pressure. However, a successful meeting does not mean an immediate rise in price because the success has already been “priced in.” Hopefully, we have a successful meeting. Oil prices need back to back rallies to sustain its ascension to the top. Nigeria needs this, the OPEC cartel needs this, Shale oil companies need this, and the Kremlin budget needs this too.

Patricia

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Business News

UAC of Nigeria Plc. Announces Annual General Meeting

Annual General Meeting of the Members of UAC of Nigeria PLC will be held at UAC House No. 1-5 Odunlami Street, on Wednesday, 15th July, 2020

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CONSUMERS|UACN: Weak operating performance, UAC of Nigeria Plc. Announces Annual General Meeting

UAC of Nigeria Plc., today, notified the public that the next Annual General Meeting of the Members of UAC of Nigeria PLC will be held at UAC House (12th Floor), No. 1-5 Odunlami Street, Lagos, Nigeria on Wednesday, 15th July 2020 at 10.00 o’clock in the forenoon in order to transact the following businesses:

Here are the agenda for the meeting scheduled by UAC Of Nigeria Plc.

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  1. To lay before the Members the Report of the Directors, the Consolidated Statement of Financial Position of the Company as at 31st December 2019, together with the Consolidated Statement of Comprehensive Income for the year ended on that date and the Reports of the Auditors and the Audit Committee thereon.
  2. To declare a Dividend.
  3. To elect & re-elect Directors.
  4. To authorize the Directors to fix the remuneration of the Auditors.
  5. To elect Members of the Audit Committee.
  6. To fix the remuneration of the Directors.
  7. To renew the general mandate authorizing the Company to enter into recurrent transactions which are of a trading nature or those necessary for its day to day operations with related parties or companies in accordance with the Rules of the Nigerian Stock Exchange governing transactions with related parties or interested persons.

It will be recalled that UAC of Nigeria Plc reported FY 2019 revenue of N79.2 billion while the reported Pre-tax Profit of N7.5 billion. A loss of N14.6 billion arising from discontinued operations (UPDC) led to a net loss of N9.3 billion in FY 2019. Excluding the loss from discontinued operations, the company made a Net Profit of N5.3 billion (up 26% y/y) in FY 2019.

 

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Companies

Nigeria’s tier-1 banks earn N18.4 billion from account maintenance charges in Q1 2020

Banks’ earnings from account maintenance charges, though low when compared to other revenue streams, still make up a significant portion of their non-interest income.

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Nigeria's banks, Account Maintenance Charges

Nigeria’s tier-1 banks — comprised of First Bank, UBA, GTBank, Access Bank, and Zenith Bank (FUGAZ) — generated a total of N18.4 billion from bank maintenance charges in Q1 2020. The sum is 17.12% more than N15.6 billion that was generated by the five banks during the comparable period in 2019.

This is according to recent checks by Nairametrics Research, a breakdown of which revealed that Zenith Bank generated the most income from account maintenance fees, followed by Access Bank and then, GTBank.

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See the breakdown below.

  • Zenith Bank Plc: N5.7 billion
  • Access Bank Plc: N3.9 billion
  • Guaranty Trust Bank Plc: N3.3 billion
  • First Bank Plc: N3.1 billion
  • United Bank for Africa Plc: N2.3 billion

READ MORE: Stocktaking: Ebenezer Onyeagwu’s year as CEO of Zenith bank

What you should know about account maintenance charges

Banks’ earnings from account maintenance charges, though low when compared to other revenue streams, still make up a significant portion of their non-interest income.

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According to the latest directive by the Central Bank of Nigeria on bank charges, Nigerian banks are allowed to charge their customers a “negotiable” N1 per mille. What this means is that banks can charge N1 per N1000 debit transactions on current accounts. Banks’ account maintenance charges come in the form of COT (i.e., Commission on Turnover) which is a charge levied on customer withdrawals by their banks. In Nigeria, these charges are mainly applicable to current accounts.

“Current Account Maintenance Fee (CAMF): Applicable to current accounts ONLY in respect of customer-induced debit transactions to third parties and debit transfers/lodgments to the customer’s account in another bank. Note that CAMF is not applicable to Savings Accounts,” said part of the CBN directive.

(READ THIS: You must know these terms if you want to own a bank account in Nigeria)

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Customers don’t like account maintenance charges

Interestingly, a lot of Nigerian bank customers are not keen on bank maintenance charges. After all, nobody likes to get debit alerts, especially so when such is coming from their banks. Perhaps, the main reason some customers dislike bank maintenance charges is because they tend to be higher than the interest capitalised entitled to such customers. Professor Ayobami Ojebode of the Department of  Communications and Language Arts, University of Ibadan, recently complained about this, saying:

“Dear bank, I see o! Don’t think I don’t see you! You credit me N50 interest on my savings and debit N150 for account maintenance & card fee etc! Come here, what do you really think you are doing?”

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Patricia
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