DON'T SWEAT OVER INCREASING LOAN LOSS PROVISIONS.

If you are one of those worried about recently discernible increase in loan loss provision by most banks in Nigeria, well stop worrying. It has the blessing of the Central Bank of Nigeria (CBN).
We found out on Saturday December 5, that the CBN early in November sent a circular to all banks to increase loan loss provision to 2%.
The circular was dated November 11 2015 and signed by Mrs Tokunbo Martins as director of banking supervision.
After acknowledging concern of the financial sector in recent times because of macroeconomic environment, the circular told banks:
"..In line with the provision of section 12-14 of the Prudential Guidelines for Deposit Money Banks 2010....banks are required to immediately increase the general provision on performing loans to 2% in the Prudential review of their credit portfolios. This is an attempt to ensure that adequate buffers against unexpected loan losses are built up."
It added : " This directive is without prejudice to the relevant provisions of the International Financial Reporting Standards"
In other words, banks were increase provision as percentage of performing loans knowing that nonperforming ones will also be handled as provided in the law.
Earlier, yours sincerely had posted an analysis which drew attention to increased provision for loan loss by most banks with many of the big ones more than doubling such provisions in figures to September 2015.
Of course, the true situation of doubtful and non performing loans by banks can not be ascertained until the full year audited figures are released early next year.