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.
- 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;
“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.”
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.”
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;
- 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.