JP Morgan Estimates Nigeria’s Net Foreign Reserves at $3.7 Billion, Discrepancy with CBN Figures Raises Concerns

Global financial services giant JP Morgan has revealed its assessment of Nigeria’s net foreign reserves to be approximately $3.7 billion. This estimation stands in stark contrast to the $33.8 billion reported on the Central Bank of Nigeria (CBN) website as of August 17.

JP Morgan’s latest report on Nigeria, titled “Nigeria: Reform pause rather than fatigue,” sheds light on this significant disparity in figures.

In its analysis, JP Morgan highlights that its calculated value is notably lower than the $14 billion reported at the close of 2021 and attributed this discrepancy to the utilization of larger currency swaps and borrowings against the forex reserve.

The report states, “Based on partial information from the audited financial accounts, we estimate that CBN’s net forex reserves were around $3.7 billion at the end of last year, from $14 billion at the end of 2021.”

JP Morgan’s calculations factor in various aspects, including the inclusion of $5 billion in International Monetary Fund Special Drawing Rights (SDR) to the external reserves, resulting in a total gross forex reserves estimation of $37.8 billion. This value aligns closely with the 30-day moving average of $37.08 billion, previously published on the central bank’s website.

The bank further explains that its estimation is derived by adjusting the gross external reserves through three significant forex liability lines: forex forwards ($6.84 billion), securities lending ($5.5 billion), and currency swaps ($21.3 billion). To determine the currency swaps value, JP Morgan deducts forex forwards and outstanding Over The Counter (OTC) Futures balances from an overall aggregate published in the financial accounts.

JP Morgan acknowledges the challenges posed by the low forex reserve but asserts that the CBN remains capable of withstanding the associated pressures. The report indicates that, particularly due to profits from swap arrangements between the CBN and commercial banks, exchange rates will continue to strengthen.

This revelation by JP Morgan raises concerns about the accuracy of the figures provided by the Central Bank of Nigeria and underscores the need for greater transparency and accountability in reporting the nation’s financial reserves. As Nigeria navigates its economic landscape, ensuring the accuracy of such crucial data becomes imperative for informed decision-making and maintaining investor confidence.