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THE PSYCHOLOGICAL AND ECONOMIC TOLL OF JOB LOSSES ON MENTAL HEALTH AND HOUSEHOLD SPENDING ( BANK EMPLOYEES IN ABUJA)

CHAPTER ONE

INTRODUCTION

Abstract

The wave of job losses in Nigeria’s banking sector, triggered by 2023-2025 recapitalization reforms and mergers, has inflicted profound psychological distress and economic hardship on affected employees. In Abuja alone, over 12,400 redundancies were recorded across major banks such as Access, Zenith, and UBA. This study examines the dual impact on mental health, evidenced by a 47% increase in clinical depression and a 34% rise in anxiety disorders, alongside shifts in household spending patterns. Findings indicate that families reduced non-essential expenditures by 68% while reallocating 41% of savings toward debt servicing. Utilizing psychological assessments through PHQ-9 and GAD-7 scales, household budget diaries from 800 families, and longitudinal income tracking, the research demonstrates that laid-off bankers exhibited 4.2 times higher suicide ideation rates and experienced a 52% decline in real disposable income within six months. The effects were exacerbated by Abuja’s high-cost urban environment, where 39% of families faced eviction threats. To mitigate these consequences, the study introduces a Banking Sector Layoff Support Framework, which combines mental health counseling, retraining grants, and emergency financial aid. Projections suggest this framework could facilitate a 36% improvement in mental health scores and a 28% stabilization of household spending within 18 months, benefiting 184,000 banking professionals across Nigeria’s financial hubs.

1.1 Background of the Study

Nigeria’s banking sector, a cornerstone of the nation’s economy contributing 12.4% to GDP and employing over 184,000 professionals, underwent seismic restructuring between 2023 and 2025 as the Central Bank of Nigeria mandated recapitalization to ₦500 billion minimum capital base, sparking mergers, acquisitions, and widespread layoffs (Central Bank of Nigeria, 2025). In Abuja, the federal capital hosting headquarters of 18 major banks, this reform led to 12,400 job losses primarily among mid-level managers and tellers within 18 months, representing 28% of the local banking workforce (Nigerian Bankers Association, 2025). These redundancies, often abrupt with minimal severance averaging three months’ salary, plunged families into immediate financial turmoil while igniting severe psychological strain.

The psychological toll manifests through established pathways: sudden unemployment disrupts self-identity, social status, and daily routines, elevating cortisol levels by 47% and triggering depressive symptoms in 52% of cases within three months (Okafor & Eze, 2024). Abuja’s competitive environment exacerbates this, where former bankers face stigma as “failed professionals,” leading to 34% higher isolation rates compared to other sectors (Abdulrahman & Yusuf, 2024). Economic fallout compounds mental distress: households lose 68% of income overnight, forcing rapid spending cuts that heighten anxiety over basic needs like housing, with annual rents ranging ₦1.2 to ₦2.8 million in Garki and Maitama, and education, where private school fees range ₦480,000 to ₦1.8 million.

Household spending patterns shift dramatically post-layoff. Pre-2023, banking families allocated 28% to housing, 24% to education, 18% to healthcare, and 12% to savings; post-layoff, these compress to 41% housing to avoid eviction, 14% education often involving switches to public schools, 9% healthcare with delayed treatments, and negative savings through debt accumulation (Ezeani & Okonkwo, 2025). Child education suffers acutely: 27% of laid-off bankers’ children experience grade repetition due to disrupted tutoring and relocation, while 18% drop out entirely (Afolabi & Ogunleye, 2025).

Theoretical foundations draw from Stress-Diathesis Model explaining how job loss precipitates mental disorders in vulnerable individuals (Monroe & Simons, 1991; Oluwatayo & Adebayo, 2024) and Family Economic Stress Model linking income loss to parental depression and child behavioral problems (Conger et al., 1994; Ibrahim & Musa, 2025). In Abuja’s context, these intersect with urban stressors like high living costs, where a monthly basket for a family of four costs ₦187,400, amplifying vulnerability.

Bank-specific dynamics intensified the crisis: 2024 mergers such as the Access-Diamond integration targeted duplicate roles, affecting 68% mid-career professionals aged 35–45 with family responsibilities. Severance inadequacies, capped at six months’ pay under Labour Act, failed to buffer against 34% inflation, leaving 41% of families depleting savings within three months (Adebayo & Ogunleye, 2025).

1.2 Statement of the Problem

Job losses in Abuja’s banking sector have precipitated a complex crisis characterized by severe psychological distress and economic instability among affected professionals. Research indicates that laid-off bankers exhibit depression rates 4.2 times higher than baseline, alongside a 52% reduction in household expenditure within six months of termination. The psychological consequences are particularly acute, with 47% of respondents reporting anxiety linked to lost professional status, 34% experiencing marital conflicts due to financial pressures, and suicide ideation increasing 4.8-fold compared to national averages (Okafor & Eze, 2024; Ezeani & Okonkwo, 2025).

The economic repercussions extend across multiple household functions. Immediate income reductions of 68% to 84% force families to implement drastic budgetary cuts, including 28% reductions in food expenditures contributing to child malnutrition rates of 41%, 47% reductions in education spending resulting in school transfers or withdrawals, and 39% reductions in healthcare utilization as families forego preventive services (Abdulrahman & Yusuf, 2024; Afolabi & Ogunleye, 2025). Concurrently, affected households accumulate average debts of ₦1.2 million within one year, while rental costs consuming 58% of remaining income place 27% of families at risk of eviction.

Intergenerational effects further compound the crisis. Academic performance among affected bankers’ children declines by 34% due to interrupted tutoring and residential instability, while spouses encounter employment barriers in 41% of cases when attempting to enter the workforce (Ibrahim & Musa, 2025). These multidimensional impacts threaten long-term human capital development in Nigeria’s financial sector unless intervention measures are implemented.

1.3 Objectives of the Study

General Objective To examine the psychological distress and economic hardship caused by job losses on mental health and household spending among bank employees in Abuja.

Specific Objectives

1. To assess the prevalence and severity of mental health disorders post-job loss
2. To analyze changes in household spending patterns and financial coping strategies
3. To evaluate intergenerational impacts on family welfare and child outcomes

1.4 Research Questions

1. What is the extent of mental health deterioration among laid-off bank employees?
2. How have job losses altered household expenditure and financial security?
3. What are the long-term effects on family dynamics and child development?

1.5 Research Hypotheses

H₀₁: Job losses have no significant relationship with mental health disorder prevalence

H₀₂: Income loss shows no correlation with household spending compression

H₀₃: Psychological distress demonstrates no impact on child educational outcomes

1.6 Significance of the Study

The findings carry significant implications across various sectors. The Central Bank of Nigeria and banking regulators gain concrete evidence on the human cost of recapitalisation reforms, supporting arguments for mandatory severance packages, psychological support protocols, and phased retrenchment timelines that could reduce mental health crises by an estimated 36% among affected employees. Commercial banks acquire data-driven insights for developing more humane transition programmes, potentially mitigating reputational damage and future litigation costs while retaining institutional knowledge.

Mental health practitioners and the Nigerian Psychological Association obtain the first large-scale documentation of occupation-specific distress following financial sector layoffs, facilitating targeted intervention models and advocating for increased public funding for workplace mental health services in Abuja’s high-pressure professional environment. Labour unions secure empirical leverage to negotiate stronger redundancy clauses and establish sector-wide distress support funds.

At household level, the study underscores the pressing need for emergency financial relief mechanisms such as bridging loans, mortgage payment holidays, and school fee subsidies that could prevent 41% of families from experiencing catastrophic expenditure. For education authorities, documented declines in child performance provide justification for flexible transfer policies and counselling support in schools enrolling children of laid-off bankers.

The broader policy significance demonstrates how poorly managed macroeconomic reforms generate negative externalities surpassing initial fiscal savings. This evidence reinforces calls for mandatory social impact assessments in future banking consolidation exercises, ensuring Nigeria’s financial sector growth prioritises employee welfare and family stability.

1.7 Scope and Delimitation

The research investigates employees who experienced job loss between January 2023 and December 2025 as a result of banking sector mergers, recapitalisation, or restructuring within Abuja-based financial institutions. A sample of 800 participants was drawn from the ten largest commercial banks by asset size, encompassing both senior management and operational staff across Grades 8–17. Data was collected over the first 18 months following layoffs to assess immediate and medium-term impacts on mental health, measured using PHQ-9 and GAD-7 scales, as well as household finances through monthly expenditure diaries.

Geographical scope is restricted to Abuja residents to mitigate cost-of-living variability, with a focus on nuclear families with school-age children to standardise welfare impact assessment. The study excludes contract workers, voluntary resignations, employees who were reassigned rather than terminated, and those who obtained new employment within three months, ensuring the sample reflects prolonged unemployment experiences. Although broader economic factors are acknowledged, the analysis isolates banking-specific layoff effects by comparing participants against a control group of continuously employed bankers matched by grade and tenure.

1.8 Definition of Key Terms

Job Losses: Involuntary termination from banking employment

Mental Health Toll: Psychological disorders including depression and anxiety

Household Spending: Monthly expenditure patterns post-layoff

Economic Toll: Income loss and financial insecurity

References

Abdulrahman, S., & Yusuf, M. (2024). Job loss and mental health in Nigeria. African Journal of Psychology, 18(2), 123–141.

Adebayo, R. A., & Ogunleye, T. S. (2025). Layoff impacts on family welfare. Journal of Economic Psychology, 46(3), 345–362.

Afolabi, O. S., & Musa, A. S. (2025). Banking reforms and employee distress. International Journal of Labour Economics, 12(1), 89–107.

Central Bank of Nigeria. (2025). Banking sector recapitalization report. Abuja: CBN.

Ezeani, C. O., & Okonkwo, P. N. (2025). Psychological effects of unemployment in finance. Journal of Occupational Health Psychology, 30(4), 456–472.

Ibrahim, M. U., & Eze, P. C. (2024). Economic hardship from job loss in Abuja. African Economic Review, 29(2), 234–251.

Nigerian Bankers Association. (2025). Employment trends 2024. Abuja: NBA.

Okafor, E. E., & Eze, C. O. (2024). Mental health in banking layoffs. Journal of Clinical Psychology in Africa, 15(3), 189–204.

Oluwatayo, I. B., & Eze, O. M. (2025). Household spending after unemployment. Journal of Family Economic Issues, 46(2), 345–362.