Retrenchment Fear Grips Banks And Oil Companies!

It is said , is not a source where did u get dis information

Retrenchment Fever Grips Banks, Oil Companies
•Loans to customers dry up
^{By Yemi Adebowale and Shaka Momodu, 09.05.2009}

Bank employees and their colleagues in the oil and gas sector are facing a gale of massive retrenchment following the recent shake up in the banking sector by the Central Bank of Nigeria.

The shake up led to the sack of five bank CEOs and their executive directors, and their subsequent take over by the Central Bank of Nigeria which injected N420 billion and appointed interim CEOs to run the affected banks.

Since the CBN’s intervention, several banks across board have embarked on extensive restructuring programmes aimed at instituting improved corporate governance, cost-cutting measures, and streamlining of internal functions for enhanced efficiency.

The restructuring being undertaken by the banks, particularly the ones bailed out by the CBN, is focused on cutting costs in order to improve liquidity and is the key factor responsible for the planned retrenchment in the banking sector.

In the same vein, the suspension of credit facilities to firms in the oil and gas sector by banks and the pressure mounted on them to pay their debts has forced many to scale down operations, resulting in planned job cuts in the sector.

Investigations revealed that though the five banks recently bailed out by the CBN – Oceanic International Bank Plc, Finbank Plc, Intercontinental Bank Plc, Union Bank of Nigeria Plc and Afribank Plc – will be worst hit by the expected retrenchment exercise, some of the five banks cleared by the CBN and several others whose audits are being rounded up are equally planning to lay off thousands of staff.

Investigations revealed that the five bailed out banks have an estimated work force of about 80,000.

Intercontinental Bank alone, according to THISDAY findings is said to have a work force of over14,000 in its nearly 400 branch network. 
Sources say of this figure, hundreds have been pencilled down for lay offs. The bank is also said to have embargoed branch expansion plans and may be considering pruning down its branch network from the current 400.

Similarly, Oceanic and Union Bank are concluding plans to lay of thousands of workers across their branches nationwide.

“We are in the middle of restructuring and in times like this, it is not unusual for the new management to downsize.

“So it is a normal thing. We want to cut costs to improve the bank’s liquidity,” a source in one of the bailed out banks said.

Downsizing or right sizing as a competent source in the bank would prefer to call it, is expected to cut across every department of the bank but most affected would be non-core banking staff.

The new management of the bailed out banks are said to have received the full backing of the CBN to carry out all necessary measures to reposition the banks, including the planned lay offs.

To this end, sources say a leaner, healthier, more prudent, stronger and viable financial bottom-line will be the cache as against size and spread of the old order.

Many banks have equally resorted to slashing staff salaries, perks and other allowances, in a bid to cut costs.

Meanwhile, the 14 banks not yet cleared by the CBN and the five that passed the CBN test - First Bank, GTBank, Sterling Bank, Diamond Bank and UBA – have become weary about extending credit facilities to companies in the country, especially Nigerian businesses.

A senior executive of one of the banks recently cleared by the CBN but craved anonymity said that no bank in its right senses would grant any loan request under the current atmosphere of uncertainty.

“No one knows for sure what the CBN will come asking for tomorrow. So we are keeping whatever we have with us and we are going to do that for some time to come,” he said.

Where any form of credit or overdraft facilities is made available, most banks have decided to restrict to mostly blue chip companies with demonstrable track records of meeting debt service obligations.

All categories of Nigerian businesses are affected but worst hit are those in the oil and gas sector which are largely dependent on banks for opening letters of credit for the importation of petroleum products.

Oil and gas firms were prominent on the list of debtors released by the CBN. As at December 2008, the banking sector’s total exposure to the oil industry stood at over N754 billion, representing over 10% of aggregate credit and over 27% of shareholders’ funds.

Some bank chief executives spoken to reveal that they have tightened controls on credit lines, particularly to the oil and gas sector, to avoid the saga of non-performing loans and subsequently getting into trouble with the CBN.

In response, oil and gas firms now demand for upfront payments from companies, including blue chip firms before supplying them diesel and Low Pour Fuel Oil (LPFO) for running their plants and machinery.

This cash and carry measure has started to affect the operations of several firms, particularly those in the aviation, manufacturing and telecoms sector.

For example, for most of this week, there were several flight delays, as airlines struggled to raise cash to pay for aviation fuel. 
Blue chip firms such as WAPCO (Lafarge), MTN, Cadbury, NBL, Zain and Guinness have also been compelled to scramble to pay the oil and gas firms upfront for diesel and LPFO.

All the foreign creditors cut their credit lines after Sanusi axed 5 banks. The worst effect of Sanusi's action is yet to come.

All the foreign creditors cut their credit lines after Sanusi axed 5 banks. The worst effect of Sanusi's action is yet to come.

Welcome to Globalization, firing is happening around the world due to the economic downturn. Instead of doing ours when the world did theirs our CBN governor  and the bank crooks were lying that everything was fine. The truth is the banks took bad risk that resulted in losses and now they MUST recognize the loss.  What we are going to see in the next few months is a correction, a lot of banks got too big too fast and went on a hiring spree. Some of this banks went beyond their means.

Welcome to Globalization, firing is happening around the world due to the economic downturn. Instead of doing ours when the world did theirs our CBN governor  and the bank crooks were lying that everything was fine. The truth is the banks took bad risk that resulted in losses and now they MUST recognize the loss.  What we are going to see in the next few months is a correction, a lot of banks got too big too fast and went on a hiring spree. Some of this banks went beyond their means.