Home News CBN tackles JP Morgan over estimation of Nigeria’s net FX reserves

CBN tackles JP Morgan over estimation of Nigeria’s net FX reserves

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The Central Bank of Nigeria (CBN) has berated American Financial Service Institution, JP Morgan, over its recent estimation of the country’s Foreign Exchange (FX) reserves.

Naija News reported that JP Morgan had earlier in the week estimated that the CBN’s net FX reserves fell to $3.7 billion at the end of 2022, compared to $14 billion in 2021.

But in an interview on Africa Independent Television (AIT) on Wednesday, the Director of the Monetary Policy Department in the CBN, Hassan Mahmud, said the recent estimate of the country’s FX reserves by JP Morgan was presented out of context.

Mahmoud said the estimation by the American financial institution was to arouse market sentiments or to mislead the public. He added that fluctuations, liabilities and encumbrances to the reserves were only natural and normal.

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

“But the central bank has tried as much as possible to be transparent. What I will say about those numbers is that it is just funny in the sense that number one, reserves like any account balance, is a flow; there are changes that go within it at any particular time.

“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.

“I can have $20 million in my account and I am owing someone maybe $13 million that is supposed to be paid in 2027; you can’t come in 2023 and say if I remove that $13 million, your money is $7 million or you are having $7 million.

“Now, I am not having $7 million, I am having $20 million. Because before I took a facility of $13 million, I knew in the next three years, I would get $17 million so I could pay you back.

“But for you to come and tell me that no, your balance is $7 million and you can’t pay back in three years; it’s just putting it out of context. I don’t know how they did their calculations and I don’t have any information about that, but we also saw those numbers that came out.”

Asked if the public should disregard the JP Morgan estimate, Mahmud said: “It is ridicule for us (CBN) to come to the public domain, whether the CBN governor or deputy governor to speak on issues by JP Morgan. I don’t even know who said it in JP Morgan.

“I don’t want us to get to that level where we will be ridiculing ourselves as a sovereign or 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.”

Mahmud said the CBN owned about 80 per cent of funds in reserves mainly to support the local currency in periods of volatility as well as to boost the confidence of foreign investors.

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