THE PUBLIC SPHERE with Chido Nwakanma
Technological determinism has converged with disease and economic meltdown to pose an existential threat to jobs in Nigerian banking. It would be short-sighted, however, to focus only on the financial services sector as the employment issues in the banking arena plays out. The consequences of this convergence will hit every industry.
It is the technology effect. I wrote about it last year. Technology has had our breakfast and lunch, now it wants our dinner and will force a change of diet on everyone.
The Bankers’ Committee on Sunday 3 May 2020 saved the jobs of about five hundred workers in Access Bank and thousands in other banks. The Committee ordered a suspension of the planned downsizing and rationalisations in the banking arm of the finance industry. It was just-in-time.
Central Bank of Nigeria spokesman Isaac Okorafor announced the decision. The Bankers Committee declared, “To help minimise and mitigate the negative impact of the COVID-19 pandemic on families and livelihoods, no bank in Nigeria shall retrench or lay-off any staff of any cadre (including full-time and part-time).
The Bankers’ Committee decision had the imprimatur of the regulator written all over it. It was a timely decision to ward off the contagion effect. Other banks would have followed the lead of Access Bank. The Federal Government also needed to make a case for job retention during this period. On both counts, the Bankers’ Committee did well. Yet, those saved by the Central Bank’s bell now should be finalising their exit plans.
While Covid19 is the immediate fall guy for the rationalisations in the banking sector, the real culprits are the new raft of apps and programmes under the banner of fintech and the decline in the economy. Most banks paid attention only to oil and gas as well as the power sectors. Well, those sectors are now the poster boys for bad loans!
Fintech is the real challenge, and it goes beyond Nigerian banks. A report in the Financial Times in 2016 captured the effects on US and Canadian banks. “Growth of fintech forecast to spur almost 2m banking job cuts”, the 30 March 2016 report stated. It added, “European and US banks will slash staff over next decade, says Citibank report”.
Fintech? “Fintech is a portmanteau of the terms “finance” and “technology” and refers to any business that uses technology to enhance or automate financial services and processes. The term is a broad and rapidly growing industry serving both consumers and businesses”, according to the definition by builtin.com. The many fintech companies in Nigeria are more nimble and pose a considerable threat to the older banks.
The FT report noted “The catalyst for the job cuts is twofold. One factor is the new technologies that enable banks to do more online and less in branches. The other is the financial imperative for banks to be leaner as they deal with an onslaught of new competition in their most profitable niches. Citi’s research found that lending stood out as a key battleground, accounting for 46 per cent of the $19bn in private funding that flowed into fintech during the past six years. The next biggest was payments, accounting for 23 per cent of the investment in fintech.”
A similar scenario has played out in Nigeria. Banks are losing out on lending to SMEs and small borrowers. They ignored the area initially, and it appeared like good riddance to the irritation of small borrowers until the fintech firms and small lenders starting achieving scale. Suddenly, the small sums have added up and now represent a threat.
I wrote in “Technology ate our breakfast and is coming for our lunch” (Businessday, 28 December 2018) that technology is the culprit in the 23 per cent unemployment figure the National Bureau of Statistics captured for Nigeria in its 2018 report. Technology has eaten the breakfast and lunch of the worker in many places. It is changing the nature of work and the role of humans. Many certain jobs of the past are disappearing before our very eyes. It cuts across many industries and occupations.
More significantly, I noted that “The “confluence of Big Data, connectivity and artificial intelligence”, as described by Israeli Prime Minister Benjamin Netanyahu is propelling positive developments in innovation, productivity and workforce numbers in many nations of the world. Our lack of the framework for any of that means that it is causing the opposite here.”
I want to play the optimist in hoping that the Central Bank of Nigeria has a more solid plan for the unemployment challenge in the banking sector than the mere stop-gap it has announced. CBN ought to have a robust plan because it set the stage in 2007 for what has happened in 2020 with its futuristic Payment Systems Vision 2020 (PSV 2020).
CBN read the auguries well and pointed the industry to developments in electronics payments. It should then have plans that answer the question of what will happen to those the banks will lay off this year or next? To where would they go?
Artificial intelligence, big data and now covid19 demand that we respond with innovation, productivity and workforce numbers. Technology and covid19 mean that we should all prepare to change our diets. It means creating new jobs. Can we do so and when?