By Bimbola Oyesola
despite widespread understanding that no economy can survive without a strong financial sector, the Nigerian government has not done enough to shield its financial service industry from the economic recession plaguing the whole country.
According to the National President of the Association of Senior Staff of Banks and Financial Institutions (ASSBIFI), Oyinkan Olasanoye, the financial sector, even with huge profits being declared, is no longer finding things easy as in the past since banks no longer have funds to play around with. She equally notes that insurance sector suffers most during recession as it is only given thought after other expenses have been taken care of.
The ASSBIFI President, however, laments that workers in the sector have been at the receiving end of various policies of the government to salvage the economy. With over 30 per cent of the workers retrenched in the last one year, the jobs have become tedious and stressful as employers are not recruiting new hands.
She speaks more on the how TSA has affected the sector, the insurance package available for workers on retirement, and why the union is diversifying its activities among other sundry issues.
Impact of recession on financial sector
There is no economy that can survive without a strong financial services sector. In as much as the economy is in recession, the financial sector will be affected. So all bank and insurance industry workers have been affected one way or the order. Some have been forced to leave their jobs, the economic policy has made some of our jobs to be tedious and stressful because as more people are losing their jobs, there are no replacements and no new employment. It means that those on the jobs are doing more, even beyond what the International Labour Organisation (ILO) Convention permits. Recession has really affected our sector greatly.
Over the years, any time there is problem, workers have always been at the receiving end and that is why three years ago we came out with a slogan that we should not be paying the price for the inefficiency of our leaders. Early this year, we called a stakeholder meeting where we discussed with our management that it is not the laying off of employees that will solve their problem in recession or boost their production. Since we’ve been having this dialogue from time to time, we’ve been able to have good understanding of the issue. However, between last year and this year, we have lost nothing less than 30 per cent of our members to rationalisation and we keep on losing our members every year. There had been structural adjustment, there has been recession, merger and acquisition, which means that in the past 10 years we’ve lost over 60 per cent of our members, bearing in mind that the strength of any union is in the membership, what has kept this union going is that we have been visible and we are still trying to adopt more visibility. Our visibility in the financial sector is what has kept us going. When it comes to membership, we have lost a lot. But because of the strategic position we occupy, we are still relevant as if we have not lost that volume, but we have really lost a lot.
Before now, we were conscious that without even losing our membership, it would get to a stage that we would have to protest or something, it would get to a stage that our members may have to leave their jobs, so we have diversified before now. We have a guest house in Abuja, we are constructing a five-storey, 68 bedrooms suite with an event centre in Lagos here, we have a 38-hectare farmland in Abeokuta, and we also have another farmland in Abuja. We are trying as much as possible to also become an employer of labour not only because of those who are losing their jobs, but also to generate revenue that will give us financial stability. We have another unit we are having issue at present, but we believe that if government intervenes we would be able to resolve it. We call them school of banking honour. It’s a research institute like a school. We realise that most of our members that are losing their jobs could still be relevant to the sector and we also realise that with the outsourcing and the contracting of employment, organisations are bringing in people that do not have the understanding and the fundamentals of what it takes to be bankers. We believe that in as much as somebody is a graduate, he can work anywhere, but there is something called on-the-job training that one really needs. Because those working there do not understand the nitty gritty, the sector is more often exposed to fraud. What we intend to do is establish this school and research institution and it will be a training ground where all those that lost their jobs prematurely who have been well trained and have experience can now serve as trainers.
For most of our members who lost their jobs as a result of retrenchment, we always sign agreement on their behalf, we always go through due process in ASSBIFI. We may not be able to protect members from losing their jobs, but we make sure that nobody is losing their jobs without following due process. There is always an agreement we sign on their behalf so that they don’t go empty handed. Also, we have a cooperative society where our members, while on jobs, have back-up savings and now we are also trying to discuss with an insurance company to see if we can have a policy in place, a job loss policy, where anyone who loses his jobs due to no fault of his would have something to fall back on.
Why banks still make profit in recession
Financial sector only deals with finance and economy. Only few people come into production in the manufacturing sector without having financial assistance one way or the other from banks. But no matter the profit being declared by the financial sector, it’s no longer that fantastic as before, especially because of the Treasury Single Account (TSA). Before the TSA, we had funds to play around with. Government is the highest spender in the economy, and the present government is no longer spending anything. Money is being trapped in the Central Bank of Nigeria (CBN), so it’s been a bit difficult for banks to loan money to business owners. Even if we are talking of interest, this is now shrinking because before now money that is lying fallow was being made to work in the financial sector. For example, the Nigeria Customs Service (NCS) brings in money every month. They have an idea of their expenditure, know that they will not spend all their monthly revenue, so the banks can easily give the funds to the manufacturers as loans and charge interest on the loans and part of this can be given to the owners of the money, the Customs. But with the TSA, these monies are being withdrawn from the banks, CBN cannot give them out as loans on their own, which means that the manufacturing companies are suffering because they don’t have the money for their operation as banks do not have the money to loan out. Hence, in as much as they do not have the money to loan out, it is no longer possible to have as much as profit as before.
How TSA has affected the banks
The TSA has affected the whole nation, the whole economy. It’s only that because we’ve been the custodian of the whole money before, all eyes are on us. The way it has affected us is that before now, we had the opportunity to have loaned this money, but when government came with the policy, we are asked to return all this money. However, in the course of returning it, not everyone that collected the money could return it, as it has condition. As such, the banks have to go to their reserves to return money to government and that affected their liquidity. But for those that have been given loans, some are given in stages, especially for the production sector, those who want to build factories, the bank would initially give money for the construction before the equipment and raw materials. But let’s assume that if after giving money for the construction and Federal Government is demanding that the money should be returned, how would the balance be paid. There are so many uncompleted factories or those completed but have no fund to purchase equipment or raw materials. This has affected the whole economy and mostly the sector because those people find it difficult to repay loans collected from banks.
Apathy to insurance
Our culture in Africa, especially Nigeria, is a culture of God will protect me from harm. Most Nigerians, if you talk to them about insurance, they will tell you that it is God that can protect them. Even if you are telling them to take insurance on their children’s education or personal life insurance in case of any eventuality, they may look at you as an enemy and believe that you want them dead. Because of these, you see even intelligent and well to do Nigerians ready to insure their factories but not their lives and properties.
Insurance is about peace of mind. It’s not a collection that you do, but a pool. If I buy a vehicle valued at N1 million, under the law, I’m supposed to pay N100,000 to insure that vehicle. It means that you must have 10 to 15 people in that pool, and believing that it’s not all of us that will be involved in accidents for that year because it is from my 100,000 and others that will be pooled together. The pool of risks to take care of anybody that will be involved; it means it’s not all of us that will benefit from the pool that year. But for an average Nigerian, the thought is, if I’m not involved in an accident this year, what is the need for me to take insurance. So it makes it really difficult to sell insurance to individuals in Nigeria. Even those that are doing it do not see it as priority, so it means that during recession like this, insurance is not at the forefront.
Insurance is given thought after every other security and expenses have been taken care of and that is why it’s a bit difficult to sell insurance. Another thing is that we don’t have the culture of record, and in insurance, everything is documented. That is why some people believe that insurance companies are not paying claims, but they do. There was a period that my organisation paid over N3 billion for one of the top manufacturing companies in Nigeria. That N3 billion was a recapitalisation fee of an insurance company as then. So it means that an insurance company is willing to pay.
Another thing is that there are many insurance policies backed by law, but no one is really effecting or implementing them. For example, if you are constructing any building, it is supposed to be insured under the law.
With all due respect to NAICOM, CBN is the supervisory body of banks, and CBN has its own budgetary allocation, but NAICOM as the supervisory body of insurance has no allocation. So it’s like insurance company has no opportunity of being corrected without fine. Each problem or a slip by an insurance company has a fine attached to it because there is no budgetary allocation to NAICOM, as such insurance companies have a lot of expenses and this, in a way, affects what they could have been spending on advertisement.
Annuity and pension
At the point of retirement, a worker has the option to buy annuity or keep on collecting the monthly stipend from the Pension Fund Administrator (PFA). But under the law, annuity is about trying to determine your life benefit and allocating that money to suit your lifespan. For pension, it can say you will be paid for 10 years, after which there would not be any further payment, even if that person is still alive. But annuity still takes into consideration the lifespan of the family to determine what age most people in the family live up to, for the insurance firm to structure the payment. At least for the rest of that person’s life, he will be collecting money. In case the person dies before the period, the next of kin would collect the remaining balance. That’s the difference between the two. But unfortunately, our life expectancy is going down and an average Nigerian believes that he should take care of himself first before any eventuality, take his money for the five or 10 years, without keeping anything. This is what is affecting annuity, it is a very good product but not well marketed.