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The Central Bank of Nigeria (CBN) and Nigerian Accounting
Standards Board (NASB) are at loggerheads over general provisioning by banks
for their December 2010 results.

The crux of the dispute is based on whether the general
provisioning of banks should be observed for the banks’ 2010 results or
suspended due to the huge provisioning the banks have made in the last two
years.

General provisioning was one per cent of performing loans while
a two per cent controversy came up when the Central Bank released the first
revised version of the Prudential Guidelines, which the banks argued against
and was subsequently dropped in the final one.

Following the Central Bank special audit in 2009 and the
resultant spike in provisioning numbers across the banking sector, the Central
Bank made a request to the NASB Governing Council that general provisioning be
suspended for banks’ December 2009 results, which the Council approved.

In mid-2010, the Central Bank published revised Prudential
Guidelines, effective 1 July 2010, in which it outlined its plan to replace
general provisioning with dynamic provisioning, stating that it would issue
guidelines on general provisioning from time to time as a counter-cyclical
measure.

On Monday 10 January, the Central Bank sent a circular to banks
confirming that general provisioning would remain suspended for the December
2010 results.

However, the following day, NASB announced in a newspaper that
the suspension it granted was only for the December 2009 results, and that
banks must follow the accounting standards by making the required one per cent
general provisioning on performing loans, or risk administrative, civil or
criminal sanctions.

No war

NASB officials said on Monday that they would not comment
formally on the matter. A senior staff, however, said, “There is no
logger-heads; we are organisations that work together. They are members of our
board. Whatever it is we are doing, it’s not as if we want to fight and say no
to what they say.

“We know how we communicate. It is an accounting standard issue.
If for any reason the banks have an issue with that, they can come here and
consult with us; they usually do,” he said.

Mohammed Abdullahi, the Central Bank’s spokesperson, did not
respond to calls or texts to confirm if the issue has been resolved.

Meanwhile, finance experts say the Central Bank and the National
Accounting Standard Board should address the issue for industry clarity and
investment decisions, adding that the enforcement of the general provisions for
2010 will be negative for the banking sector.

“The successful enforcement by the NASB of general provisions
for 2010 will be negative for the banking sector, as we understand that all but
one international non-listed bank wrote back these provisions in their December
2009 results,” Renaissance Capital, an investment bank, said in a report issued
last Friday.

“This looks to be an impasse, but we feel there are two possible
scenarios that may arise: the stalemate remains for so long that the banks and
auditors will be at liberty to treat the accounts as they please, skewing them
towards compliance with the NASB,” while the second is that “The Central Bank
reaches an agreement with the NASB Governing Council on the issue following
which the NASB, which is the sole authority on accounting standards in Nigeria,
stands down.”