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The difficult regulatory environment, which is due to take toll on the financial sector this year, has forced a number of banks to commence the process of cutting jobs and put on hold branch expansion plans.

While some of the banks laid off some workers late last year, it was learnt that most of the lenders were planning to cut their employees’ numbers this month and in February.

Our correspondent gathered that some of the financial institutions were already outsourcing a number of job functions, a development that has seen some of them transfer a significant number of their employees to third-party companies.

Just last week, Skye Bank Plc announced that it had transferred its tellers, drivers, security personnel and other support staff members to three outsourcing firms.

Hundreds of the bank’s workers are said to have been affected by the development.

The decision, which came less than one week into the New Year, led to the disengagement of the affected employees from the bank and their subsequent transfer to third-party firms.

Skye Bank, however, said in a statement on Sunday that the move was part of the initiatives to strengthen all cadres of its workforce.

According to the statement, the outsourcing companies appointed to take over the employees are Optimum Continental Services, Strategic Outsourcing Limited and Integrated Corporate Services Limited.

The bank gave the assurance that the outsourcing firms would engage the affected employees under the same terms and conditions as they were employed by the financial institution.

Investigation by our correspondent showed that the decision of the banks to reduce their workforce and branches was meant to assist them to cut costs in the face of a looming decline in their profitability this year.

A top official of one of the major lenders, who prefer to speak under condition of anonymity, said, “Some banks have laid off a few workers; others are planning to do so. Some will engage more contract staff. All the measures are aimed at cutting costs because the banking business environment is increasingly becoming challenging.”

He added that Nigerian banks had the tradition of sacking some workers at the end of each year.

Unity Bank Plc had in July last year announced the disengagement of 170 of its workers as part of efforts aimed at repositioning it for effective service delivery.

The bank also stated that it had recruited over 300 new members of staff, mostly at the entry level.

Zenith Bank Plc, Union Bank of Nigeria Plc, Diamond Bank Plc, Enterprise Bank Limited and Keystone Bank Limited had in the last two years sacked hundreds of their workers.

Findings revealed that the latest threat of disengagement had to do with the need to realign for their operations for tougher 2015, especially as the monetary policy environment continues to get tighter.

Some of the regulatory measures introduced by the Central Bank of Nigeria aimed at protecting the economy, according to findings, have started affecting the banks’ profitability, with major impact to be felt this year

It was learnt that apart from job cuts, the banks were also planning to reduce the number of new branches to be opened this year.

Other major projects and sponsorship programmes for third-party companies, which may not readily add to the bottom line, are also due to be axed by bank executives.

Global rating agency, Fitch Ratings, and other international and local research firms had late last year predicted that Nigerian banks would witness a fall in profitability this year.

On November 25, 2014, the CBN’s Monetary Policy Committee devalued the naira by eight per cent; raised Monetary Policy Rate from 12 to 13 per cent; and also increased the private sector Cash Reserve Requirement from 15 to 20 per cent.

The development, which led to the immediate withdrawal of about N500bn from the banking system, was said to have affected the banks adversely.

Also, in a bid to halt the sliding naira, the CBN had in December stopped the banks from keeping any of their funds in foreign currencies. It also said dollars bought from it must be utilised within 48 hours, adding that the actions were aimed at stopping the banks from speculating on the exchange rate.

Experts said the recent regulatory measures would have major negative effects on the banks this year, adding that they were already feeling the effects of previous actions by the CBN, especially the increase in public sector CRR, the Asset Management Corporation of Nigeria’s levy increase, and the gradual removal of certain bank charges.

The Managing Director, HighCap Investment and Securities, Mr. David Adonri, said although banks had been affected by previous regulatory measures, the recent actions of the CBN would further affect their operations beginning from the first quarter of this year.

“A number of banks will declare good year-end results for the last financial year. But starting from the first quarter of this year, their profits may begin to decline owing to some of these regulatory headwinds,” Adonri said.

Fitch, in a report released on October 8, 2014, said actions aimed at protecting the economy and the banking system by the CBN would make the profits of the Deposit Money Banks for this year to drop.

While recalling that some of the previous regulatory headwinds had led to weaker profitability and “stemmed credit growth” in the first half of 2014, the rating agency said Nigerian banks’ assets growth and earnings would experience further fall over the next 18 months.

Fitch, however, observed that the nation’s banks were performing well despite the twin hurdles of tight monetary policy actions and new rules.

The CBN had in July 2013 increased the CRR on public sector deposits to 75 per cent from 12 per cent in order to curb inflation.

It also reduced how much the banks could charge accountholders whenever they withdrew money as part of its plans to phase out the Commission on Turnover charges.

AMCON had similarly raised its annual levy on the banks to 0.5 per cent from 0.3 per cent of their assets.

According to Fitch, the AMCON levy and network expansion strategies have made the banks to experience earnings pressure and high operating costs.

The Fitch report added that “the banks are now seeing some asset quality deterioration with rising absolute non-performing loans, reflecting fast loan growth since 2011.

“Most banks’ NPL ratios remain below the five per cent prescribed by the CBN, but Fitch views this as unsustainable in the long-run. Very high loan concentrations by borrowers and sectors expose banks, particularly the smaller banks, to significant event risk

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