Nigeria: Recession Bites Hard, Forces Banks To Close Branches [Photo]

Nigeria: Recession Bites Hard, Forces Banks To Close Branches [Photo]

 As a good number of Deposit Money Banks in Nigeria will soon start closing many of their unprofitable branches around the country as the economic recession continues to drill deep. Also report has shown that most of the banks in Nigeria would also lay off hundreds if not thousands of workers between September and December 2016.

Unity Bank Plc

These clearly revealed itself in not more than twenty four hours (24 hrs) after Unity Bank Plc laid off a total number of three hundred workers (300 workers), which is even more than the two hundred and twenty workers (220 workers) that was earlier mentioned last week by Unity Bank Plc.

Diamond Bank Plc, Ecobank and Skye Bank Plc

More also Diamond Bank Plc, Ecobank and Skye Bank Plc had also earlier in the year 2016 sacked over a total number of about three thousand workers (3,000 workers) of their various banks as the case may be.

However, it has been reveal that following the economic downturn in Nigeria , a good number of bank branches within the country could no longer justify their existence as cost analysis had also revealed that the financial institutions were spending much more on salaries and overheads than the general income from the branches Nigeria . Furthermore, a good number of prestigious top bank executives, said some lenders might be forced to relieve more workers of their duties before the end of this year 2016. One of the executive director in one of the banks  in Nigeria that recently asked some of its workers to go  rightly said, “ We have rightly laid off some of our staff members, but as you can see that it still not enough". More also some bank branches in Nigeria are just existing for the sole purpose of being there. These branches are not generating enough income as they are suppose to. What these branches are bringing in as income is far more less than what their main bank is incurring as costs on them.

Queue in the bank

“So as the case may be we have to close such branches whom are not bringing in good income before the year 2016 ends. I clearly believe that a good number of other banks  within the country are also planning to carry out the same thing.” Also commenting on the development, a well known ex-banker and Chief Executive Officer, Cowry Asset Management Limited, by name Mr. Johnson Chukwu, described the bank branch closure as an ongoing action in the banking sector in the country, especially in times of economic downturn as we may have it now. Mr. Johnson Chukwu, however, noted that the banks that will be affected were required to first make sure they notify the Central Bank of Nigeria before closing any branch of their bank within the country.

“It is an ongoing administrative thing in the banking industry. Banks will want to rationalise their branches, especially in a difficult economic times. Banks are also planning to cut costs. Branch rationalisation is normal but the Central Bank of Nigeria has to be notified first,” Mr. Johnson Chukwu explained. Furthermore, the slowdown in the Nigerian economy, which has in turn led to a high rate of non-performing loans in the banking system within the country, has made four lenders to lose at least seventeen billion naira (N17bn) in profits in the first quarter of this year 2016.

Ecobank Transnational Incorporated, Guaranty Trust Bank Plc, Unity Bank Plc and Diamond Bank Plc

To be specific, Ecobank Transnational Incorporated, Guaranty Trust Bank Plc, Unity Bank Plc and Diamond Bank Plc has recorded a combined decline of about seventeen billion naira (N17bn) in their profits before tax for the three months ended on March 31, 2016, when compared with the corresponding period of last year 2015, according to the results of the financial institutions posted on the website of the Nigerian Stock Exchange. When compared with the PBT of N30.52bn, N32.65bn, N4.26bn and N7.94bn recorded by the banks  in the first quarter of last year 2015, the combined PBT of the four banks drastically dropped by N17bn from the initial N75.4bn in the first quarter of last year 2015 to N58.4bn in the same period of this year 2016.

 Ecobank GTBank Unity Bank  Diamond Bank

Also Ecobank’s PBT fell from N30.52bn in the first quarter of  last 2015 to N20.63bn in a similar period of this year 2016, GTBank’s dropped drastically from N32.65bn to N30.68bn. That of Unity Bank dropped from N4.26bn to N1.05bn, while Diamond Bank’s came down from N7.94bn to N6.04bn. Generally, in terms of their profit after tax, the four banks listed above recorded a decline of about fourteen billion naira (N14bn).

The banks in Nigeria  had been posting sharp increases in profits before tax and profits after tax since the year 2011 after the establishment of the Asset Management of Corporation of Nigeria in the year 2010 following the banking sector crisis in year 2009.However, consistent drop in the global prices of crude oil, which is Nigeria’s main foreign exchange earner, since June 2014, majorly caused banks ’ profits around the to start declining at the end of the year 2015.  However, Majority of the 15 banks  listed on the NSE recorded declines in their full-year profits in the year 2015 financial year. However, a few ones such as Access Bank Plc, Zenith Bank Plc, United Bank for Africa Plc and GTBank outperformed the market despite sizeable volume of bad loans.In the first quarter of the year 2016, 13 out of the 15 banks posted a combined PBT of about N135.36bn, compared to N148bn in the corresponding period of last year 2015.

Similarly, the 13 banks posted profits after tax of N116.6bn in the first quarter of 2016, compared to N126.4bn in the first quarter of 2015.The 13 banks  are Access Bank Plc, Diamond Bank Plc, Ecobank Transnational Incorporated, First Bank of Nigeria Limited, GTBank, FCMB Limited, Sterling Bank Plc, Fidelity Bank Plc, UBA Plc, Unity Bank, Wema Bank Plc, Union Bank Plc and Zenith Bank Plc. Skye Bank Plc and Stanbic IBTC Bank have yet to release their full-year 2015 and first-quarter 2016 financial results. An economic analyst and Head, Investment Advisory, Afrinvest West Africa Limited, by name Mr. Ayodeji Ebo, said the declining profit in the financial services sector was a reflection of the challenges facing the Nigerian economy.