Banks Staff Strength Tumbles as E-Banking Adoption Rises

Banks Staff Strength Tumbles as E-Banking Adoption Rises

An indication has emerged that rising adoption of digital banking channels, electronic payments by customers pose a big threat to jobs in the banking sector.

Banking sector staff strength dropped more than 8% in financial year 2020, especially in junior and contract staffs category while numbers of top executives on payrolls expanded.

78% of Payments Transactions Conducted on Mobile Devices

National Bureau of Statistics (NBS) report on selected banking data showed an uptrend in e-banking adoption as 3,464,811,083 transactions volume valued at N356.47 trillion was processed in Q4-2020.

On electronic payment channels, NBS said online transfers dominated the growing transactions volume, a development supported by lockdown in the first half of 2020.

Some analysts explained that prior to lockdown, many customers were skeptical using online transfer and/or other electronic payments channels, saying the pandemic forced what has become the norm on many users.  

In the period, NBS reported that total volume of online transfers printed at 2,227,449,949 with total transactions valued at N120.27 trillion in Q4 of 2020.

But increase in digital adoption have unintended consequences as data showed banking sector staff capacity plunged 8.3% in financial year 2020.

The report highlighted that numbers of people working in the banking sector settled at 95,026 at the end of Q4-2020 as against 103, 610 in the comparable period in Q4-2019.

That means in 12 months, numbers of bankers that lost their jobs 8,584 previously engaged banks staff lost their jobs.

From 184 in Q4-2019, it was noted that numbers of executives working in the sector increased to 257 while contract staffs in banks dropped to 39,789 from 45, 350.

Numbers of junior staffs also declined from 39,896 to 37,590 in the period as numbers of executive level on banks payroll maintain uptrend in the last quarters except for Q1-2020 when 4 people left executive positions.

Most staff reduction were recorded in commercial banks as Microfinance and non-interest banking service firms recorded an increase.

MarketForces Africa checks show that despite reduced virus caseloads, Nigerian banks are to re-open some branches while some members of staff stay outside banking halls to perform their duties.

Growth in volume and value online transactions and alternative channels indicate customers are adopting use of various electronic banking service with less human interface as Nigeria lenders continue to boosts earnings with non-interest related services.

Banking sector recorded an increase in both the volume and value of transactions in online payment platforms such as online transfer, NEFT, USSD, Mobile Apps.

In the period, transaction volume from online transfer increased 39.7% while transaction value jerked up by 19.2%, according to NBS data.

Also, volume of NEFT transactions jerked up 18.4%, which then was volume surged 25.5% while transaction processed via Unstructured Supplementary Service Data (USSD) jump 9% as value of transaction grew 22.6%.

Nigerian customers adoption of banks mobile apps for transfer surged 10.8% while total value of transaction expanded by 10.9% in the Q4-2020

Despite reported growth in gross loans to customers, the Nigerian banking sector’s non-performing loans were muted in the fourth quarter of financial year 2020.

According NBS data, the sector reported a 5.3% quarter on quarter (or 16.6% year on year) increase in gross loans to ₦20.5 trillion in Q4:2020.

This was driven largely by the gradual recovery of economic activities from the COVID-19 induced lockdown, and partly, to meet the CBN’s Loan-to-Deposit benchmark of 65.0%.

Consequently, Non-Performing Loans (NPL) also increased 5.5% quarter on quarter or 16% year on year to ₦1.23 trillion.

However, on aggregate, the sector’s NPL as a percentage of Gross Loans stood unchanged year on year at 6.0% but remains 100bps above the 5% prudential threshold.

In terms of credit allocation to sectors, analysts at Afrinvest said they saw a decline in the share of banks’ gross loans to the oil & gas sector (business and services) to 25.5% from 26.6% in 2019.

However, loans to the oil & gas sector still account for the largest share of loans (both in proportion and absolute term) in Q4 and 2020.

“We suspect the reduction in the share of total loans to the sector was banks’ reaction to the heightened risk of the sector, occasioned by the COVID-19-induced-slump in global crude oil prices in 2020”, Afrinvest said.

Meanwhile, analysts also noticed some improvement in the share of total loans to Manufacturing sector coming at 15.7% from 15.3%.

Similar thing happened in the Agriculture which recorded an increase to 5.2% from 4.5%, Construction 4.7% from 4.2%, Transportation & Storage 2.7% from 2.3%, and General up   to 9.2% from 8.3% compared to 2019.

“This we believe was mainly driven by the policy push from the CBN targeted at increasing credit flows to the employment generating sectors to boost recovery”, Afrinvest said.

On the other hand, ATM transactions fell in volume and value by 14.1% and 10.1% respectively compared to Q3 of 2020, according to NBS data.

Analysts at Afrinvest said they believe this dynamics is in line with recent global trends, as transaction activities shift from physical banking to digital platforms as part of an effort to curb the spread of the pandemic.

“This dynamics also holds positive for the cashless policy agenda of the CBN if sustained”, Afrinvest added.

However, analysts said they believe sustaining these dynamics may also threaten the bank’s staff strength, as evident with the 8.3% decline in total bank staff strength (mostly junior and contract staff) in 2020.

“Overall, aside from being a critical sector to the functioning of the economy, the banking sector has shown resilience and capacity of being one of the sectors that can drive Nigeria’s recovery from the current quagmire given its double-digit growth in a pandemic year”.

Afrinvest recommend that the CBN should focus on driving policies that will support growth and stability for the sector.

Banks Staff Strength Tumbles as E-Banking Adoption Rises