Does the Central Bank of Nigeria have the power to stop banks from laying off their staff?

On the 3rd day of May 2020, a press statement banning all banks from laying off staff (full time and part time) during this pandemic was released by the CBN. This press statement was an outcome of a meeting held between them and the Bankers’ Committee (this committee comprises of representatives from every bank in Nigeria. The Apex Bank in this press statement also stated that its approval must be sought if it becomes absolutely necessary to lay off or retrench staff.

Press Statement issued by the CBN on May 3rd, 2020

The question begging for answer is, “Does the CBN have such power?”

Section 61(1) (a) of Banks and other Financial Institutions Act (BOFIA) 2004, provides thus:

“The Bank shall have power to supervise and regulate the activities of financial institutions and specialized banks”

Section 42 of the CBN Act, 2007 provides:

(1) The Bank shall wherever necessary seek the co-operation of and co-operate with other banks in Nigeria to –

(a) Promote and maintain adequate and reasonable financial service for the public;

(b) Ensure high standards of conduct and management throughout the banking system; and

(c) Further such policies not inconsistent with this Act as shall in the opinion of the Bank be in the national interest.

Section 61(1)(a) of BOFIA gives the CBN absolute power to supervise and regulate the activities of ALL banks in Nigeria, including specialized and development banks, and Section 42(c) of the CBN Act above highlighted gives the CBN the power to make policies that in its opinion are in the national interest. One of the effects that COVID-19 already has and will yet have on world economy, and particularly Nigeria is that there will be an upsurge in unemployment rates, this is because many SMEs and startups will fold up. It is therefore in the national interest if the CBN restrains any bank from laying off any of their staff at this time, whether or not they are adding any economic value to the bank at the moment. And if it becomes ‘absolutely necessary’ to lay off any staff, the CBN must be informed and its approval obtained before such can be done.

In my opinion, the requirement in the exception that the CBN has put in place with the wordings – ‘absolutely necessary’, may indeed be hard to meet, except in cases of gross misconduct or criminal actions.

As earlier stated, this decision is an outcome of a meeting held between The Central Bank of Nigeria and the Bankers’ Committee, hence no bank is left out of this new directive, not even the specialized banks and no bank can complain of said decision or renege on their participation in it. This is called the doctrine of Volenti non fit injuria in law, which in plain language means, a person who willingly enters into an agreement cannot turn back and complain of any injury resulting from same.

In my opinion, this press statement goes to say that while banks may have the liberty to run their institutions anyway they prefer, such liberty has to be within a framework of transparency and effective accountability, for ‘national interest’.


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