COVID-19: When fear of economic contraction, job losses grips a nation
The world of work is being profoundly affected by the novel coronavirus pandemic with a global recession on the horizon. Apart from the threat to public health, the economic and social obstruction will impact negatively on the livelihoods and well being of millions of workers around the world. While companies right now are facing challenges in responding to the pandemic, many across the globe are already announcing lay-offs even as hiring freezes.
The Guardian gathered that a lot of private-sector employers in Nigeria are now taking unilateral actions of sacking workers and even depriving them of some of their entitlements.
Last weekend, there were rumours that one of the commercial banks has shut down 340 of its branches nationwide due to the effects of the COVID-19 pandemic and the resultant lockdown. The Guardian gathered that the sack, if true, would eat up 75 per cent of the human resources, while the remaining 25 per cent would take 40 per cent pay cut for the remaining workers.
However, the bank, which donated about N1 billion to the Federal Government as part of its contributions to the fight against COVID-19, refuted the report. It stated that it neither had plans to sack its workers nor cut down salaries.
Also, the Central Bank of Nigeria (CBN) after a recent meeting with the Bankers’ Committee to review the implications of the COVID-19 pandemic on the Nigerian banking industry, announced that there would be no lay-offs in the sector. A circular signed by its Director, Corporate Communications, Isaac Okorafor, noted that in order to help minimise and mitigate the negative impact of COVID-19 pandemic on families and livelihoods, no bank in Nigeria would retrench or lay-off any staff of any cadre.
Further findings showed that while some companies communicated lay-off plans after paying their April salaries, others denied their workers access to their offices last Monday when they went to resume following the easing of the lockdown by the Federal Government. Some of them who spoke with The Guardian said they were simply asked to continue working from home even though they had been blocked from the companies’ virtual platforms via which they were working during the lockdown without any explanation.
Describing the development as dangerous and a sure precursor to industrial disharmony, organised labour has called on unions to remain stronger after the pandemic, and to organise collectively amid the fears that the economy would contract. They argued that the measures were to ensure that some of the gains they recorded before now would not be rolled-back.
Indeed, the country’s unemployment indices are very high and alarming, with about 60 per cent of Nigerian youths without jobs. Experts are of the view that it would be reasonable for the government to embark on meaningful economic stimulation activities that would keep people in their jobs.
National President, Association of Senior Staff of Banks, Insurance and Financial Institutions (ASSBIFI), Oyinkan Olasanoye, in an interview, said all critical sectors of the economy needed a viable and modern collective agreement, coupled with the government having a social insurance system in place for all Nigerians.
She said the association would not accept banks retrenching their workers without following due process.
“I know there will be a run on the banks. Any bank that is going to lay-off people now, they are going to face the repercussion very soon. We have discussed with the Minister of Labour and Employment, Dr. Chris Ngige and the Nigeria Employers’ Consultative Association (NECA). We know there would be job losses in the banking sector due to the pandemic, but we insist that due process must be followed.
“If the banks are shutting down their branches and asking the workers to go, we will not accept that. COVID-19 is nobody’s fault; you can’t just close down and tell people to go home,” she said.
Similarly, the Director-General of the Nigeria Employers’ Consultative Association (NECA), Timothy Olawale, said the five weeks of the economic and business shutdown has overstretched the limits of most businesses, which would certainly result in job losses.
He said businesses across a range of economic sectors were facing terrible losses, which threatens their solvency, adding that millions of workers were vulnerable to lay-offs.
He told The Guardian that employers had been advised to retain the full complement of staff for as long as far as their economic indices would permit, noting that NECA had consistently asserted that employers of labour were not always eager to lay off workers they had invested in and were productive.
But he noted that with the realities on the ground, they would be forced to make hard business decisions in order to keep their companies afloat and meet their contractual obligations to employees.
He noted that in the event that it becomes impossible to retain staff and all other options fail, employers should commence discussions with the unions or workers’ representatives on the need to declare redundancy.
“In this case, due process has to be followed. The company should be guided by Section 20 of the Labour Act as well as the Redundancy Agreement for the redundancy payment, among others. In the event of a third party contract/outsourced workers, their agreement should also be considered,” he said.
On measures the Federal Government could take to checkmate the looming job losses due to coronavirus pandemic, Olawale said the government could collaborate with NECA as the representative body of organised private sector to implement stimulus packages that are sector-specific. He urged the government to implement palliatives that would enable employers to retain their workers.
He advocated direct interventions such as direct wage or income support, wage subsidies, tax credits or tax deferrals, short-term work schemes and moratoriums on loan payments, especially loans taken by companies within the past three months. He further canvassed the establishment of a coronavirus job retention scheme, where the government pays up to 60 per cent of private-sector salaries until June as long as workers are not laid off.
Olawale told The Guardian that the scheme, which is already being implemented in countries like in the United Kingdom, France and Denmark, among others, would save jobs and reduce the negative impact of coronavirus pandemic on businesses if adopted.
“There should be a suspension of payments of taxes and levies; tax-free cash flow boost for employers. There should be a stimulus package to help pay wages or for investment to protect against a downturn in activity. The payment should be open to businesses with a turnover of less than N50 million. There should also be tax payment deferrals for a period of six months, upon request, with a discount on interest rates,” he said.
On what should be the government’s focus towards revitalising the economy post-COVID-19, the NECA boss called for policy coherence and effective leadership
He further called for the payment of debts owed to infrastructure contractors and the issuance of new contracts to urgently refurbish critical infrastructure.
To cushion the effects of job losses on social security, he said: “Over time, disengaged employees have remitted the tax to the government to provide social security to them. They, therefore, deserve to be compensated during the period of unemployment via the following – free health coverage at public health facilities, and provision of unemployment benefits for a minimum of six months.”
On his part, the Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, said that sustaining the pre-COVID-19 workforce would be very difficult for most businesses.
The reality, according to him, is that the current shocks to businesses were severe and devastating. He cited instances and level of shocks that resulted from the lockdown, noting that it completely grounded some sectors such as the aviation, hospitality, entertainment, construction and road transportation, among others.
Yusuf said the affected sectors host thousands of small businesses that provide them various services, adding that small and micro enterprises (SMEs) were also grounded by extension.
“So where will the resources come from to pay salaries to their workers? Most SMEs don’t have the buffers to absorb shocks of this magnitude?
“There is a second level of shock, which is the supply chain shocks. Some industries cannot get supplies to run their businesses because of the global supply chain disruptions. There is also an element of domestic supply chain disruptions resulting from the several blockades imposed by the states on interstate movements. Many businesses are reeling under the pains of these disruptions. Where will they get the resources to pay their staff?
“There is a third level of shock, which is the macroeconomic shock. The economy is currently witnessing sharp exchange rate depreciation. The implication of this for an import-dependent economy is quite profound. Businesses with high import exposure will have to struggle to survive. There is also the risk of liquidity crisis in the foreign exchange market, which we need to worry about. Again, the impact of this on businesses would be detrimental,” he said.
The LCCI boss maintained that these shocks were real threats to the continuity of many enterprises, stressing that a business has to be alive to retain staff or create jobs.
Against the backdrop of this gloomy outlook, he submitted, like Olawale, that government could reduce the degree of job losses through some stimulus policies like tax reliefs and concessions, tariff concessions for some critical sectors, review of regulatory fees and charges, moratorium and interest concessions on commercial bank loans, and concessions on workers PAYE by states to boost consumer demand.
These, according to him, would provide some succour and reduce the risk of job losses. He, therefore, urged labour unions to be in the vanguard of the advocacy vanguard.
He added: “However, the present situation also presents a conundrum. The government has limited fiscal space to offer stimulus and palliatives. The slump in oil price, the contraction in oil output and the downturn in the economy have considerably impacted the government’s revenue.
“Hopefully, the current crisis will throw up new opportunities, especially in the import substitution space in the economy. Also, innovation and creativity will be robustly rewarded at a time like this. Happily, the government has set up and Economic Sustainability Committee to look into these issues and make recommendations.”