On Monday, Skye Bank Plc. became entangled in the retrenchment spree currently going on in Nigeria’s financial sector, after the bank fired 175 members of its staff. The bank confirmed this dismissal by stating that the affected workers failed the 2015 appraisal exercise.

This comes after the federal government directed financial institutions to suspend the ongoing expulsion rampage until after the conciliatory meetings scheduled to take place on the 2nd of July. This announcement was made by Nigeria’s Minister of Labour and Employment, Chris Ngige, who said that his office had received complaints from those affected by the recent developments.

“This is as a result of the apprehension by my office of the various disputes in the sector in accordance and in compliance with the provisions of the labour laws of Nigeria,” said Chris Ngige.

This recent retrenchment by Skye Bank brings the total number of staff laid off in about two weeks to 1,415. Recently, Diamond Bank Plc. laid off 200 staff and Ecobank Nigeria laid off 1040 staff, the larges number to date.

In response to the retrenchment by Skye Bank, Ngige issued a fresh warning to employers in the financial sector, especially banks, saying it will not hesitate to withdraw the operating license of any bank or telecommunications company that ignores its directive to stop sacking workers en masse.

Does the Federal Government have the right to tell Banks not to sack their staff?

A banker with over 15 years of experience in the sector, who pleaded anonymity, remarked that it is funny how the federal government wakes up and decides to tell Nigerian banks not to fire their staff. According to him, the government did not employ the staff and and has no right to ask them to stop the ongoing retrenchment as these banks are also tax payers in the country. He further stated that Nigerian banks are currently laying off their staff in order to cut costs, sue to the current economic situation in the country exacerbated by stringent monetary policies.

Following the outcome of the Central Bank’s recent Monetary Policy Committee meeting, where it was voted that Nigeria will be adopting a flexible exchange rate regime and allow the Naira float freely, several investors have sold their stock in financial services due to uncertainties on the policies the CBN will implement next.

Data, which was released by National Bureau of Statistics on Nigeria’s economy for the first quarter of 2016, revealed that the country has experienced a negative growth of -0.36 percent recently. This announcement suggests that the economy is headed for a recession as the second quarter is projected to be worse. Also, this means that the country will have higher rates of unemployment than it does right now. No smart business person or investor will be willing to continue incurring greater costs while their company continues to record negative profits.

Skye Bank, which recently fired its workers, is yet to publish its 2015 full year results and has issued a profit warning informing investors that its 2015 results will be bad. Other banks that have done this include FCMB, Ecobank and Diamond Bank, although these banks have all released their results for 2015.

Does this recent move by the Minister of Labour suggest that Nigeria is moving towards a command and control economy?

It is surprising that a democratic government is attempting to interfere in a free market economy where the banks are not owned by the government. All over the world, the only role the government has to play in a free market economy is a regulatory one, not a dictative one. Ordering private institutions that are out to make profit and in turn pay tax to the government from the same profit is not allowed.

This recent threat by the government clearly shows this administration is trying to move the economy towards a command economy where the government is in absolute control of everything in the country.

The disadvantages of a command economy are numerous. For a country to run a command economy, it means there will be an increase in the level of unemployment. It will also discourage entrepreneurs from pursuing business ventures while the black market flourishes due to restrictions on certain goods. We are already seeing all of the aforementioned play out in Nigeria. More companies are going to lay off staff and people now sell goods and services restricted from gaining foreign currency for import at very high rates. The government’s policies have led to a reduction in the amount of goods imported into Nigeria yet the country does not have the capacity to produce these goods to meet demand. Nigerians, on the other hand, can no longer export their goods because they do not have the necessary input to produce goods for export.

During President Buhari’s campaign, he promised to make three million jobs available in one year but that has not happened. Now that the banks are on a retrenchment spree the government is asking them to stop. Is the government willing to step in and help the banks pay salaries to people it cannot afford?

The current situation bears a striking resemblance to Nigeria’s economy during Buhari’s first stint as Commander-in-Chief. If the right steps are not taken Nigeria could see itself in an even worse state in the coming months.

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