Central Bank of Nigeria Dismisses JP Morgan’s FX Reserves Estimate

In a recent interview on Africa Independent Television (AIT), Hassan Mahmud, the Director of the Monetary Policy Department at the Central Bank of Nigeria (CBN), responded to JP Morgan’s estimate of the country’s foreign exchange (FX) reserves.

Mahmud described the estimate as being presented “out of context.”

Earlier this week, JP Morgan estimated that the CBN’s net FX reserves had decreased to $3.7 billion at the end of 2022, down from $14 billion in 2021.

Mahmud acknowledged the fluctuations, liabilities, and encumbrances to the reserves but emphasized that such variations were natural and expected.

He stated, “We also read the JP Morgan numbers in-house, and we didn’t panic over that. That’s not the first time we are seeing people and institutions reeling out numbers; they must have their intentions to do that, whether to rouse market sentiments or mislead the public.”

Mahmud went on to explain that reserves, like any account balance, are subject to continuous changes.

He provided an analogy, saying, “I can have $20 million in my account and owe someone maybe $13 million that is supposed to be paid in 2027. You can’t come in 2023 and say my balance is $7 million. I am not having $7 million; I am having $20 million because, before I took a facility of $13 million, I knew that in the next three years, I would get $17 million to pay you back.”

He expressed his doubts about JP Morgan’s calculations, noting that he didn’t have any information on how they arrived at their numbers.

However, he acknowledged that the CBN had observed those numbers.

Mahmud also highlighted that the CBN holds approximately 80 percent of the funds in reserves, primarily to support the local currency during periods of volatility and to boost the confidence of foreign investors.

He emphasized the transparency of the central bank, stating, “We have the numbers there. The central bank’s reserves are on our bank net. Yes, the figure you see today may not be exactly to the last decimal point, but you have that picture that you are seeing there. We have $33 billion, there is an IMF facility there, the SDR is also there, we have the JP Morgan numbers that you mentioned, we have forwards, they are all there.”

When asked whether the public should disregard JP Morgan’s estimate, Mahmud emphasized that it would be inappropriate for CBN officials to publicly respond to JP Morgan’s claims.

He stated, “It is a ridicule for us (CBN) to come to the public domain, whether the CBN governor or deputy governor, to speak on issues raised by JP Morgan. I don’t even know who said it at JP Morgan. I don’t want us to get to that level where we will be ridiculing ourselves as a sovereign country because of a private investor that has its own motives for giving those numbers. It could also be that those numbers were quoted out of context.”