Impact of Covid-19 on non-performing loans and loan loss provisioning in Nigeria

The Covid-19 pandemic has perhaps been one of the biggest challenges to human existence in recent times. A black swan is certain to create a gigantic credit risk in the financial sector of any economy. While the economic impact of the novel pandemic is yet to be fully ascertained, conservative statistics predict that most major economies will lose about 2.4 per cent of the value of their gross domestic product (GDP) during 2020, with developing economies like Nigeria likely to be the worst affected. Nations neither anticipated nor prepared for a pandemic of this nature with financial arrangements now requiring swift and effective response. The devastating effect of the pandemic has been felt globally. For example, the Transport for London has so far suffered about a 95 per cent reduction in its revenue, and the UK has injected about £350 million into its economy to stem the tide. The US and other countries have also implemented similar bail-outs.