In a sense, the CBN has not strayed too far from this path. The snag is just that the non-inclusion of a sun-set clause in its communication on the ban on banks’ firing their staff will make for an unwieldy policy environment post-pandemic.


When, recently, footage of the chief executive officer (CEO) of one of the leading banks in the country, apparently making the case for his business to let go of some of its staff, made the social media rounds, few of those who responded bothered about the provenance of the material. It did not matter that the conversation was for internal purpose. Instead, it quickly morphed into a moral dilemma. And as with most matters moral, the gist was in how the stories were spun. First, we are invited to consider the spectacle of the fat cat discussing how to expropriate the cheese away from mice way down the food chain. What did it matter if he also offered some of his blood in the water, when the prevailing consensus was that the gap between his pay and those he was contemplating laying off was already an abomination before God?

Then, there was the context of the whole dialogue ― the domestic economy was already in the uncertain, but troublesome embrace of a global pandemic. Cooped up in the house as part of preventative measures against the transmission of the virus at the heart of the pandemic, news of one’s forthcoming loss of a job could only have compounded the restlessness and irritability that most people were experiencing from their long-enforced confinement. Worse, across the world, at least in the more advanced economies, we were seeing efforts to ensure not only that businesses did not go under as a result of the public health responses to the pandemic. But also, that work losses were few and consumer spending remained supported.
Did it make sense, therefore, that the central bank then promptly stepped in to remedy the situation? That it imposed a ban on banks’ restructuring their workforce without first consulting it? No! And the failure here is two-fold. First, the way we structure incentives locally remains a major let to economic efficiency. A careful analysis of schemes like the U.S.’s paycheque protection programme (PPP) indicates that it does not forbid businesses from laying off staff. That would be unconscionable in the circumstances. And this is a point that most commentators on that video clip of the bank CEO missed. In order to remain in business, it is an imperative that costs come in below revenue. So, your typical businessman must find ways to keep costs down, including through swapping spending on labour for technology in those circumstances where conditions make the former dearer than the latter. And/or to drive revenues up.

…what the pandemic has done is raise public interest concerns above that of the workings of the invisible hand. Because the processes by which resources move from sectors with suboptimal performance to where more value may be extracted from them has been constrained by this crisis, it makes sense for governments to put a floor to bankruptcies…


The movement restrictions that is one response to holding down the spread of the virus at the heart of this pandemic has altered this dynamics considerably. It is for this reason that, elsewhere, public policy (through programmes like the PPP in the U.S.) has moved to pay a proportion of the wages of workers who would otherwise have been fired by their employers. For most businesses, locally, revenues will tail off as consumer spending, responsible for about two-thirds of domestic output, shrivels. Banks may have seen a falloff in costs associated with most of their branches having been battened down during the restrictions on movement. And because the marginal costs of doing business on their alternate channels is near zero, they could have seen revenue nudge up a smidgen. But over the medium term, an economy expected to shrink this year will hurt banks’ corporate and commercial clients, especially through the build-up of dodgy loans.

To mull over what these diverse trends mean for a business’ long-term future is the proper thing for CEOs to do. To find ways of mitigating the cost to the economy of the many decisions these CEOs will take eventually, is the proper thing for policy makers to do. Put differently, what the pandemic has done is raise public interest concerns above that of the workings of the invisible hand. Because the processes by which resources move from sectors with suboptimal performance to where more value may be extracted from them has been constrained by this crisis, it makes sense for governments to put a floor to bankruptcies, and through cash grants to keep consumers above water.

In a sense, the CBN has not strayed too far from this path. The snag is just that the non-inclusion of a sun-set clause in its communication on the ban on banks’ firing their staff will make for an unwieldy policy environment post-pandemic.

Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.