CBN counters JP Morgan, says estimate of Nigeria’s net FX reserves ‘misleading’

The Central Bank of Nigeria (CBN) says the recent estimate of the country’s foreign exchange (FX) reserves by JP Morgan was presented “out of context”.

Hassan Mahmud, director of monetary policy department, CBN, spoke when he featured on Moneyline with Nancy, a programme on Africa Independent Television (AIT), on Wednesday.

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

Reacting to the development, Mahmoud said that fluctuations, liabilities and encumbrances to the reserves were only natural and normal.

“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, institutions reeling out numbers; they must have their intentions to do that, whether to rouse market sentiments, whether to mislead the public,” Mahmud said.

“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 know in the next three years, I will get $17 million so I can 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.”

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

““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,” the CBN official said.

“We have $33bn, there is IMF facility there, the SDR is also there, we have the JP Morgan numbers that you mentioned, we have forwards, they are all there.”

Asked if the public should disregard the JP Morgan estimate, Mahmud said: “It is a 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.”