Tier-1 Banks Outsourced N277bn Services In 5yrs – Investigation

Tier one banks

BEVERLY HILLS, April 05, (THEWILL) – Nigeria’s Tier-1 deposit money banks (DMBs) recorded outsourced services of over N277 billion within a five-year period – 2015 to 2019, investigation through their respective annual reports has revealed. The group comprises First Bank, Zenith Bank, Access Bank, Guaranty Trust Bank and United Bank for Africa. They rank top among Nigeria’s over 20 banks by their “Tier-1 capital” status which is the core measure of the banks’ financial strength from a regulator’s point of view. The bulk of the outsourcing centred on contract staffing.

Data published by the surveyed banks in their respective annual reports shows that the Tier-1 banks outsourced services totalling N40.1 billion in 2015, N46.19 billion in 2016 and N55,74 billion in 2017.  The figure jumped to N64.24 billion in 2019 to peak at N70.14 billion in 2019. Only Zenith and UBA have published their 2020 financials at the time of this report.

On an individual bank basis, First Bank recorded the highest figure with N86.38 billion in 2019 from N15.82 billion in 2015; it is followed by Access Bank’s N55.93 billion in 2019 from N6.52 billion in 2015.  Access Bank’s N8.1 billion in 2015 jumped to N55.93 billion in 2019; while GTB outsourced services in 2019 hit N43.48 billion from N7.86 billion in 2015.  Zenith Bank’s reports, though contained unspecified figures, outsourced a total of N37.20 billion services; part of this was recorded among ‘Other expenses’ in its 2015 and 2016 reports.

GT Bank categorized its 2018 ‘Outsourced’ services into staff and material products/services; with N8.25 billion channeled to contract staff engagements.

In essence, the outsourced services of the Tier-1 banks rose by 42.87 per cent during the review period. The bulk consists more of staff and minor non-staff services.  All the same, the figures continue to increase as the banks adopt several cost-saving measures to consolidate their foothold in the market.

Outsourcing entails obtaining goods or a service by contract from an outside supplier. Essentially, it is an agreement in which one company hires another company to be responsible for a planned or existing activity that is or could be done internally. It sometimes involves transferring employees and assets from one firm to another under contract that spells out the obligations to the parties involved.

Outsourcing became a priority among the DMBs as a cost-saving measure and to free resources to strengthen their competitive edge in the industry.  It also turned out to be an avenue for personal enrichment by bank executives as most of the contracts reportedly go to firms owned by them, their relatives or associates.  The worsening unemployment situation also caused the banks to embrace downsize and push their regular employees into the labour market. They, in turn, hire desperate young graduates for contract jobs that earn the employee relatively low income.

The latest data from the National Bureau of Statistics (NBS) revealed that Nigerian banks have a total of 46,235 contract staff members as at Q1 2019. This compares to 45,238 in Q4 2018, and 32,013 in the first quarter of 2018. It further revealed that contract staff rose by 44 per cent year-on-year.

The report also showed that total bank employees rose to 105,017 as at Q1 2019, representing a 0.33 per cent rise compared to the immediate previous quarter. This compares to 17 per cent year-on-year concerning employee hire for the banking sector. Essentially, Nigerian banks are hiring more contract staff compared to full staff for obvious reasons.

Surprisingly, the banks are increasingly relying on outsourcing for core banking operations, unlike in other industries where outsourcing focuses on non-core functions. Contract staff doing core functions are now graded with functions like janitor, security guard, cleaner and those in other menial activities.

Contract staff as support staff constitute the category of workforce in Nigerian banks who are ‘supplied’ by consulting firms. As employees of these outsourcing firms their services are seconded to designated banks which pay their salaries on an agreed commission with their employers.

Findings show that contract staff status has no pre-determined tenor, notwithstanding the word “contract” in the engagement terms. Presently, they form over 70 per cent of the entire workforce in Nigerian banks with total individual staff monthly emoluments of between N40,000 – N150,000 depending on the bank.

As contract staff, they do not enjoy promotion and other entitlements like annual leave/bonus and terminal or disengagement benefits. They are more graduates of polytechnics and colleges of technology as against universities. They are also mainly engaged as tellers, marketers and sometimes customer service officers.

The Nigerian Deposit Insurance Corporation (NDIC) and the Chartered Institute of Bankers of Nigeria (CIBN) have at various times pointed accusing fingers at the contract staff for the rising cases of fraud in the banking industry.

The CIBN revealed that at least 75 percent of banks’ insider related fraud cases are masterminded by contract staff engaged by the concessionaire entities contracted the by financial institutions, while NDIC disclosed that temporary staff members in banks are responsible for 64 per cent of fraud and forgeries committed annually.

While speaking during a seminar for business editors and financial journalists in Ilorin, Kwara state, in 2015, the immediate past managing director/chief executive, NDIC, Alhaji Umaru Ibrahim, said, “A total of 10,612 of such cases were reported in 2014 as against 3,786 cases in 2013, which showed an increase of 183 per cent.

“The amount involved in 2013 was N21.80 billion as against N25.61 billion in 2014, which was a 17.5 per cent increase with expected/actual loss increase from N5.76 billion in 2013 to N6.19 billion in 2014.

“It was also discovered that temporary staff, clerks and tellers accounted for 64 per cent of the frauds and forgeries in 2014, which required urgent attention to improve the electronic payment controls, IT Security, human capital and integrity profiling as well as motivation of staff.” These allegations have not gone down well with the outsourced bank workers.

The Deputy General Secretary, National Union of Banks Insurance and Financial Institutions Employees (UBIFIE), Sola Aboderin, condemned the blame heaped on the banks’ contract staff by the authorities. He vowed that the group would resist any action that would tarnish their members’ image and jeopardize their welfare, especially the recent move by the Economic and Financial Crimes Commission (EFCC) to compel bank workers to declare their assets.

In an interview with THEWILL, Aboderin said, “who really are bank employees? The banks outsource most of the positions such as tellers, marketers and those doing the core job.  These people are not regarded and treated as bank employees.

“Those in HR, ICT and Legal departments are not the ones doing the banking job, yet they are engaged as permanent employees. But the ones exposed to the risk of banking are not treated as bank employees.  How would you then tell them to declare their assets? Are they declaring to their employers – the consulting firms, or to the banks they are outsourced to?”

Notwithstanding widespread condemnation of the “slavish” treatment against banks’ contract staff, the system is not likely to be stopped with soaring unemployment rate (33.3 percent as at Q4 2020) and the banks’ thirst for cheap labour.  Human Resource experts argue that outsourcing is a legitimate business practice that has international backing because it is obtainable globally.

“The outsourcing system has created job opportunities for thousands of Nigerian youths who are trained and equipped with skills for future jobs either as employees or self-employed. Notwithstanding their ‘low status’, there is some air of fulfilment and high self-esteem among them being seen as bank workers, irrespective of their calibre”, said Nel Benson, a Labour Economist.