Oil price crash: Mass sacking looms in private, public sectors

As crude oil price continues its descent, and the economy falters, strong indications have emerged that workers in both private and public sectors are faced with mass retrenchment.

Stakeholders in both sectors, who spoke to us on Friday, painted a gloomy picture of the economy and the prospects of workers in the new year. They based their projections on recent happenings in the Nigerian and global economies.

Oil prices have been in steep decline since June 2014 as a result of slow demand growth and the United States’ oil boom, which has increased supply. The global oil benchmark, Brent, against which Nigerian oil is priced, on Tuesday, tumbled below $58 per barrel, hitting its lowest levels since May 2009.

We had exclusively reported on Tuesday that at least 70,000 civil servants in 30 ministries, departments and agencies of the Federal Government had yet to receive up to three months salaries.

While the Federal Government is believed to owe workers of the Ministry of Labour and Productivity salary arrears ranging from one to three months, 11 state governments could not pay December salary to workers. Three of the states – Benue, Plateau and Osun – have been reported to owe workers three months’ salary arrears.

In separate interviews with us, stakeholders expressed fears that companies and public institutions were planning to address the downturn in the economy with cost-cutting measures and downsizing.

On Friday, the Petroleum and Natural Gas Senior Staff Association of Nigeria gave indications to this effect when it raised the alarm that companies, especially petroleum companies, had plans to retrench staff.

According to the association, non-core employees of oil firms in the country may be asked to quit their jobs, if the fall in oil prices persists till April or May.

The Media Officer, PENGASSAN, Mr. Babatunde Oke, told Fidelis Chidi blog that employers had grown weary of the slump.

“The effect might be severe if it continues till May because some employers are already complaining that they may need to shed weight, if it persists till then. Of course, it will affect contract staff, if the slump persists,” Oke added.

Similarly, the Deputy President (South), National Association of Small Medium Enterprises, Mr. Orimadegun Agboade, stated that retrenchment had already begun in some sectors.

He said, “We closed for the year earlier than usual. Ordinarily, we take a break close to Christmas. But with the way things are right now, many companies closed two weeks before the normal closing date.

“Based on recent events, federal, state and local governments still owe salaries of up to three months. It is an indication that things are not right at all. In fact, many of us are afraid of what will happen.”

Agboade stated that the current foreign exchange rate is the harbinger of the gale of retrenchments that would sweep workers out of the manufacturing sector.

“For instance, I am a manufacturer of medicine; I received a notice from my bank two weeks ago that the Federal Government had placed an embargo on all letters of credit. The implication of this is that immediately we run out of the raw materials we have now, the hope of getting more will be slim, or it won’t come on time.

“In the pharmaceutical industry, where I belong, close to 98 per cent of our raw materials are imported. A lot of companies are already cutting salaries,” Agboade added.

The NASME Deputy President further said the scale of retrenchment could be as high as 25 per cent. He warned that if things were not sorted out quickly, it could reach 50 per cent.

Similarly, the Chairman, National Association of Small Scale Industrialists, Lagos State chapter, Mr. Segun Kuti-George, said the fact that the foreign exchange rate was not in equilibrium with the naira was a sign that mass retrenchment might be closer than expected.

“We have more naira chasing fewer dollars now. Also, the monetary policy is moving from 12 per cent to 13 per cent higher interest rate. We now have a higher rate of exchange, which inherently means inflation.

“It means that prices of imported and locally-made goods will go up, which would mean lower demand and, therefore, lesser profits for companies. This may then lead to layoffs,” he explained.

The Director-General, Lagos Chamber of Commerce and Industry, Muda Yusuf, predicted that the year would be challenging for businesses, as the cost of production would increase, while purchasing power would decline.

He explained that businesses would have to look at all possible options for survival, including cost reduction in other areas. The process of reducing costs, according to him, may result in cutting the number of employees.

At the presentation of the 2015 budget to the National Assembly, the Minister of Finance and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, had announced more austerity measures. She had explained that the measures were aimed at cushioning the economic impact of the drop in oil prices.

She added that the measures would be implemented from the beginning of the second quarter of 2015 to boost the ratio of non-oil revenues to oil revenues. The Federal Government’s 2015 budget estimates of about N4.3trillion was planned with a $65 oil price benchmark.