“It Is Just Funny”: CBN Speaks on JP Morgan's $3.7bn Estimate of Nigeria’s Net Reserves
- The Central Bank of Nigeria has reacted to JP Morgan's estimate that Nigeria's net foreign reserves are at $3.7 billion
- JP Morgan's revelation raised eyebrows among experts and foreign investors who were concerned about the state of Nigeria's economy.
- Checks by Legit.ng show that Nigeria's gross foreign reserves stood at over $33 billion as of Tuesday, August 22, 2023
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The Central Bank of Nigeria (CBN) has faulted JP Morgan's recent estimate that Nigeria's foreign reserve is at $3.7 billion.
According to Dr Hassan Mahmud, the director of the Monetary Policy Department of CBN, the estimate from JP Morgan is out of context.
Source: Twitter
Hassan reacted while speaking to AIT's “Money Line” programme on Wednesday.
Legit.ng had earlier reported that JP Morgan noted that Nigeria has a lot of liabilities, and when it is paid off, the reserves will be lower than the quoted figures on the CBN website.
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Part of the report reads:
"An addition of US$5.0bn in IMF Special Drawing Rights (SDR) to external reserves to arrive at total gross FX reserves of US$37.8bn, broadly in line with the 30-day moving average of US$37.08bn previously published on the central bank’s website.”
CBN clarifies position
CBN director explained that the fluctuations and liabilities burden on the reserves were only natural and normal.
Hassan explained further that the CBN built the reserves to defend the naira regarding its value to other currencies.
He said:
“We(CBN) have also read the JP Morgan numbers. But we didn’t panic over that it. That’s not the first time individuals and organisations reels out figures. They likely have motives behind their actions, whether to stimulate market emotions or mislead the general public.
“What I will say about those numbers from JP Morgan is that it is just funny in the sense that number one, reserves like any account balance, is a flow; it changes.
“Two, even if you have outstanding liabilities, you don’t mark the outstanding liabilities to market on a day and say this is your net balance.
"Consider this scenario: I have $20 million in my account, and I have a debt of around $13 million that is due for payment in 2027. It wouldn't make sense for someone to come in 2023 and state that if the $13 million debt is deducted, I have only $7 million
“Now, I am not having $7 million, I am having $20 million. Because before I took a facility of $13 million, I know in the next three years, I will get $17 million so I can pay you back.”
Nigeria owns about 80% of funds in reserves - CBN
Mahmud also disclosed that CBN owned about 80% of funds in reserves mainly to support the local currency in periods of volatility as well as boost the confidence of foreign investors, among others.
He said:
“However, for you to inform me that your balance is $7 million and you're unable to repay within three years, it's simply presenting the information out of context.
“Yes, there are liabilities burden to the reserves, which is normal. The CBN built the reserves to defend the naira in terms of its value to other currencies and close to 80 per cent of the reserves is CBN’s funds.”
CBN issues stern warning to banks involved in illegal sale of forex
The Central Bank of Nigeria (CBN) has issued a warning regarding potential repercussions for financial institutions involved in the illegal sale of dollars or unauthorised forex transactions, legit.ng earlier reported
The warning follows the unfortunate decline of the Nigerian currency, the naira, against the dollar at official and unofficial markets.
Folashodun Shonubi, the acting Governor of the CBN, conveyed this message while delivering a lecture titled "Diaspora Remittances and Nigerian Economic Development" in Abuja.
Source: Legit.ng
