Introduction: A Landmark Move Toward Fair Banking Employment

In a bold step to reform Nigeria’s banking sector, the House of Representatives has progressed a critical bill aimed at eliminating informal and contract labor in banks. Sponsored by Rep. Fuad Kayode Laguda (Surulere 1), the proposed legislation—titled “A Bill for an Act to Amend the Banks and Other Financial Institutions Act, 2020”—successfully passed its second reading on December 11, 2025. This development signals a potential shift toward fair labor practices, job security, and legal compliance in Nigeria’s financial institutions.

If enacted, the bill would criminalize the use of informal or contract workers in banks, addressing long-standing concerns over exploitation, low wages, and lack of benefits for thousands of employees. This article explores the bill’s key objectives, legal implications, and potential impact on Nigeria’s banking workforce.

Key Points: What the Bill Proposes

• Prohibition of Informal Labor: The bill seeks to ban banks from hiring workers on informal or contract terms, ensuring permanent employment with full benefits.
• Criminalization of Exploitative Practices: Banks violating the law could face legal penalties, including fines or sanctions.
• Worker Protections: The legislation aims to guarantee fair wages, job security, and access to welfare provisions (e.g., pensions, health insurance).
• Compliance with Labor Laws: The bill aligns with Nigeria’s Labor Act and employment standards, closing loopholes exploited by financial institutions.
• Committee Review: The bill has been referred to the House Committees on Banking Institutions and Labour for further scrutiny before its third reading.

Background: The Rise of Informal Labor in Nigeria’s Banking Sector

The Problem: Exploitation Under Contract Employment

For years, Nigeria’s banking sector has relied heavily on contract and informal workers, often hiring employees through third-party agencies to bypass permanent employment obligations. This practice has led to:

• Wage Suppression: Contract workers earn significantly less than permanent staff, despite performing similar roles.
• Job Insecurity: Many employees face arbitrary terminations without severance or legal recourse.
• Lack of Benefits: Informal workers are frequently denied pensions, health insurance, and paid leave.
• Violation of Labor Laws: Nigeria’s Labor Act (2004) and Employees’ Compensation Act (2010) mandate fair treatment, but enforcement has been weak.

Why Banks Prefer Contract Labor

Banks justify contract hiring by citing:

• Cost Efficiency: Lower salaries and no long-term benefit obligations reduce overhead.
• Flexibility: Easier to scale workforce up or down based on demand.
• Regulatory Arbitrage: Exploiting gaps in labor laws to avoid compliance.

However, critics argue these practices undermine worker rights and erode industry standards.

Analysis: Legal and Economic Implications

Legal Framework: How the Bill Aligns with Existing Laws

The proposed amendment to the Banks and Other Financial Institutions Act (BOFIA) 2020 would strengthen enforcement of:

• Nigeria Labor Act (2004): Requires fair wages, written contracts, and termination protections.
• Pension Reform Act (2014): Mandates employer contributions to pension schemes.
• National Health Insurance Scheme (NHIS): Employers must provide health coverage.

By criminalizing non-compliance, the bill introduces deterrent penalties (e.g., fines, license revocations) for banks violating labor standards.

Economic Impact: Costs and Benefits

Practical Advice: What Workers and Employers Should Do

For Bank Employees

1. Know Your Rights: Familiarize yourself with Nigeria’s Labor Act and the proposed BOFIA amendments.
2. Document Employment Terms: Keep records of contracts, payslips, and communications with employers.
3. Join a Union: Organizations like the National Union of Banks, Insurance and Financial Institutions Employees (NUBIFIE) can provide legal support.
4. Report Violations: File complaints with the Federal Ministry of Labour and Employment or National Industrial Court if rights are denied.

For Banks and Financial Institutions

1. Audit HR Practices: Review current employment contracts to ensure compliance with impending laws.
2. Budget for Transition: Allocate funds for increased salaries, pensions, and benefits.
3. Engage Legal Experts: Consult labor lawyers to restructure hiring policies.
4. Communicate Transparently: Inform staff about changes to avoid uncertainty.

Frequently Asked Questions (FAQ)

Q1: What is informal labor in Nigeria’s banking sector?

A: Informal labor refers to workers hired without permanent contracts, often through third-party agencies. They lack job security, benefits, and legal protections.

Q2: How will the bill affect current contract workers?

A: If passed, banks must either convert contract workers to permanent staff or terminate their employment with severance (as per labor laws).

Q3: What penalties will banks face for non-compliance?

A: The bill proposes fines, license suspensions, or legal sanctions for banks violating the law.

Q4: When could the bill become law?

A: After the third reading and Senate approval, it requires the President’s assent. This process may take 3–12 months.

Q5: Are there exceptions for temporary or seasonal workers?

A: The bill’s current draft does not specify exceptions, but committees may refine this during review.

Conclusion: A Step Toward Ethical Banking

The advancement of Rep. Fuad Laguda’s bill marks a pivotal moment in Nigeria’s fight against labor exploitation in the banking sector. By prohibiting informal employment and enforcing fair labor standards, the legislation could:

• Improve livelihoods for thousands of bank workers.
• Strengthen Nigeria’s compliance with international labor conventions (e.g., ILO standards).
• Set a precedent for other industries grappling with contract labor abuses.

However, its success hinges on robust enforcement, stakeholder cooperation, and balanced implementation to avoid unintended economic disruptions. As the bill progresses, workers and employers alike should prepare for a more equitable and legally compliant banking workforce.

Sources and Further Reading

• Vanguard News: Original report on the bill’s second reading. www.vanguardngr.com
• Banks and Other Financial Institutions Act (BOFIA) 2020: Central Bank of Nigeria
• Nigeria Labor Act (2004): Federal Ministry of Labour and Employment. www.labour.gov.ng
• National Union of Banks, Insurance and Financial Institutions Employees (NUBIFIE): www.nubifie.org
• International Labour Organization (ILO) Standards: www.ilo.org