May 17, (THEWILL) — Nigeria’s banking sector is increasingly shifting labour costs away from direct payroll and into operating expenses, as outsourcing becomes more embedded in the industry’s post-recapitalisation structure.
A review of 2024 and 2025 financial statements across Tier-1 and Tier-2 banks shows a consistent pattern: while staff costs remain elevated, a growing share of workforce-related spending is now captured under third-party service and operational expense lines.
Industry data indicates that spending on outsourced and contract staff rose by 9.42 percent to N222.82 billion in 2025. Over the same period, personnel expenses across major banks increased by 30.58 percent to N644.01 billion, reflecting higher compensation for core employees, particularly in specialised roles.
This dual movement rising personnel costs alongside increasing outsourcing expenditure suggests that staff cost disclosures no longer fully represent the size or structure of the banking workforce.
Estimates show that contract staff account for approximately 42.75 percent of the sector’s workforce of over 90,000 employees. In some Tier-1 institutions, outsourced workers are reported to make up as much as 65 percent of frontline roles, including tellers, customer service personnel, and call centre agents.
Permanent employees are increasingly concentrated in areas such as digital banking, risk management, treasury operations, and compliance. These roles have seen upward pressure on wages as banks compete with financial technology firms and other sectors for skilled talent.
Bank-level disclosures reflect this trend. Access Holdings reported N504.17 billion in personnel expenses for the 2025 financial year, rising to N131.64 billion in Q1 2026, a 24.7 percent year-on-year increase. The group’s operating expenses stood at N960.8 billion, indicating a significant cost base beyond direct staff compensation.
Zenith Bank recorded N204.2 billion in personnel costs in 2025, with Q1 2026 expenses rising by 47 percent year-on-year to N63.02 billion. United Bank for Africa (UBA) reported N283.4 billion in personnel expenses in 2025, while Guaranty Trust Holding Company (GTCO) recorded N145.8 billion, alongside growth in operating expenses linked to technology and outsourced services.
Across these institutions, operating expenses have grown at a pace that reflects increased reliance on third-party service providers, particularly for operational and customer-facing functions.
Data from the Nigeria Employers’ Consultative Association indicates that outsourcing can reduce labour costs by up to 40 percent compared to maintaining equivalent permanent roles. This cost differential has become more relevant in the current macroeconomic environment, where inflation reached 34.8 percent in late 2024 and interest rates remain elevated.
The Central Bank of Nigeria’s recapitalisation policy, which raised minimum capital requirements for banks, has also influenced cost structures. As banks work to meet higher capital thresholds, there has been increased emphasis on managing fixed costs, including long-term salary commitments.
Outsourcing allows banks to convert fixed labour costs into variable expenses, providing flexibility in workforce management. This approach enables institutions to scale operations in response to market conditions without expanding permanent headcount at the same pace.
At the same time, compensation for core staff has continued to rise. Estimates suggest that approximately 13,790 core employees in the sector earn an average annual salary of N8.62 million, significantly higher than outsourced workers, whose earnings are typically 50 percent to 70 percent lower.
The divergence in compensation reflects broader labour market dynamics, particularly demand for expertise in digital infrastructure, cybersecurity, and financial technology.
Despite strong revenue performance—listed banks generated approximately N26.3 trillion in gross earnings in 2025—profitability pressures remain. After-tax profits declined by 7.36 percent, largely due to increased loan loss provisions and higher operating costs.
This has reinforced the focus on cost efficiency, with outsourcing serving as one of the primary tools available to management.
However, the increasing reliance on contract staff has operational implications. Industry observers note that high turnover among outsourced workers can affect service continuity and institutional knowledge, particularly in customer-facing roles.
There are also governance considerations. Reports within the industry have raised concerns about potential conflicts of interest, where executives may have affiliations with outsourcing firms providing services to their institutions.
From a reporting perspective, the shift toward outsourcing has implications for financial transparency. As more workforce-related costs are recorded under operating expenses, comparisons of staff costs across banks may not fully capture differences in employment structures.
Operating expenses for 10 major banks rose to N3.23 trillion in the most recent reporting cycle, reflecting the broader cost base that now includes outsourced labour, technology services, and third-party operations.
The trend is expected to continue through 2026 as banks adjust to the post-recapitalisation environment. Early data suggests continued growth in both personnel expenses for core staff and operating expenses linked to outsourced services.
The evolving structure indicates that the banking workforce is increasingly divided between a smaller group of permanent employees and a larger base of contract staff supporting day-to-day operations.
As this model expands, staff costs alone are likely to become a less reliable indicator of total employment within the sector, with operating expenses providing a more comprehensive view of workforce-related spending.
Ogochukwu Onwaeze is a writer specializing in business and economic journalism. At THEWILL News Media, she translates market trends, financial developments, and policy shifts into clear and engaging stories.
