The Nigerian economy has been quite unstable for some time now. From falling oil prices to increasing naira to dollar exchange rate that have multiplier effects on the economy. Nigeria has been plagued by unemployment for a long time, the rate of unemployment has been at 23.9% since 2013 and from the way things are going, it doesn’t look like it going to be reducing anytime soon. The multiplier effects of the fall in Nigeria’s oil prices is evident in the financial report of oil and gas companies in the country.
Because of the fall in oil price from $110 to $55 in June 2014 oil & gas firms have been experiencing losses since middle of last year. Every company depends on it revenue and profit for continuous running; these companies however can no longer maximize their profits because their total cost (expenditure) no longer matches their total revenue which leads to a deficit (loss). The fact that these companies are making losses make them want to stay afloat hence the downsizing of employees.
For instance Schlumberger Limited has laid off 20,000 of its employees between 2014 and 2015. This was because the lower oil prices and cutbacks in their exploration and production forced their decision.
Other companies in the oil & gas sector have also laid off employees. According to the chairman of the Trade Union Congress Mr Hyginus Onuegbu, Shell laid off 7,000 of its employees, Baker Hughes – 13,000, Weatherford International – 14,000, Haleburton – 18,000. These companies are presently experiencing losses and cutbacks hence their decision to lay off their workers so they can stay afloat.
The increase in the naira to dollar exchange rate also has the multiplier effect on unemployment. The unstable nature of the naira in comparison to the dollar has led to a rise in the price of wheat and other imported raw materials used in the production of consumer goods in Nigeria, also there has been an increase in the Value Added Tax (VAT) of these commodities.
The Nigerian Bottling Company which is part of the Coca-Cola Hellenic group has laid off 1,800 workers because of the increasing exchange rate. The company has experienced a 14% decrease in its earnings last year and also a declining revenue growth.
The Flour Mills of Nigeria is not left out of this trend, the unstable exchange rate led to an increase in the price of wheat and VAT which affects their production processes. Over 2 million jobs are at stake as a result of this. The company has experienced a steady decline in its earnings since 2013; it’s gross profit decreased by 8.4% from #24.4 billion. In December 2013 it’s profit was #43.7 billion, it’s profit before tax also decreased by 55.7% from 8.4 billion. It’s profit after tax also experienced a decrease of 44.5% from #9 billion.
Diamond Bank also laid of about 1000 workers this year because of restructuring of the banks operations.
While some companies have seemingly genuine reasons for laying off workers, some others…
Lacasera laid off over 700 workers this year because they decided that they wanted to be part of unions that have their benefits at heart. The owners of the company refused because they saw unionism as a threat to them. The workers had been protesting over their salary packages which can be considered meager when compared to what their Indian counterparts in the same company took home monthly. The Nigerian workers were being paid #30,000 monthly while the Indian workers took home as much as #800,000 monthly. The Trade Union has stepped in on behalf of these workers and negotiations with the company have begun.
Iroko TV also laid off hundreds of workers this year mostly from their marketing department of its Lagos office because they were not able to meet up with set targets.
The list goes on really as we still have many businesses like Deal Dey & Jumia who also laid off hundreds if not thousand of employees.
Will the trend be ending anytime soon? We will see!