CBN Replies JP Morgan On Estimate Of Nigeria’s Net FX Reserves

CBN Replies JP Morgan On Estimate Of Nigeria’s Net FX Reserves

The Central Bank of Nigeria (CBN) has criticized the recent assessment of the country’s foreign exchange (FX) reserves by JP Morgan, stating that the presentation was “taken out of context.”

Hassan Mahmud, the director of the monetary policy department at CBN, shared these views during his appearance on the program “Moneyline with Nancy” on Africa Independent Television (AIT) on Wednesday.

Earlier this week, JP Morgan estimated that the net FX reserves of CBN had decreased to $3.7 billion by the end of 2022, compared to $14 billion in 2021.

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Mahmud, in response to this evaluation, clarified that fluctuations, liabilities, and commitments affecting the reserves were typical and not unexpected.

He stated, “We also reviewed the JP Morgan figures internally and we didn’t react drastically to that. This isn’t the first time we’ve encountered individuals or institutions releasing figures; they must have their motives for doing so, whether to stir market sentiment or to misinform the public.”

He continued, “However, the central bank has made efforts to be transparent. What I can say about these numbers is that they are somewhat amusing, given that, firstly, reserves, much like an account balance, are fluid; there are constant changes occurring within it.”

Mahmud highlighted that the value of reserves should not be solely assessed by market liabilities on a given day. He illustrated this with an analogy, explaining that a person with $20 million in their account but also owing $13 million, shouldn’t be evaluated as having only $7 million. He emphasized that the context and future projections are essential considerations.

He further revealed that around 80 percent of the funds within the reserves are owned by the CBN to support the local currency during periods of market volatility and to bolster the confidence of foreign investors.

“We possess the figures. The CBN’s reserves are visible in our bank system. While the current figure you see may not be pinpoint accurate, you have the general picture. We have $33 billion, which includes an IMF facility, SDR, JP Morgan’s numbers, and forwards. All these components are accounted for,” Mahmud explained.

When asked about the credibility of the JP Morgan estimate, Mahmud emphasized that it would be unwise for the CBN to publicly debate or comment on JP Morgan’s statements. He also noted that he wasn’t even aware of who specifically at JP Morgan made these statements.

He concluded, “We shouldn’t allow ourselves to be in a position where we, as a sovereign nation, are ridiculed due to a private investor’s assessments. These figures could very well have been taken out of context and it’s possible that they have their own motives for providing those numbers.”