CBN: What’s JP Morgan’s Interest In Nigeria’s Forex Reserve?

By Bayo Bernard, Business Editor

The last may not have been heard in the controversy surrounding Nigeria’s foreign reserves. A country’s forex reserve is the total value of its total savings held in foreign currencies.

The magazine reported earlier the claim by JP Morgan, a US-based financial service firm that Nigeria’s net forex is now less than $4 billion.

“We estimate that CBN’s net FX reserves were around $3.7 billion at the end of last year, from US$14.0 billion at end-2021,” the firm said in a report which analysts said unsettled key stakeholders in the nation’s financial sector, including the CBN.

The firm raised the alarm about how the Forex reserves fell to barely $4 billion from $14 billion within two years.

According to key analysts close to the nation’s apex bank, the report rattled the CBN at a time when efforts were being made to address the shortfall in the forex market and depreciation of the naira.

This is even more so after JP Morgan predicted in the report that the market could become more volatile, leading to further depreciation of the naira, except CBN took bold steps to source forex from different areas.

“That report came at the wrong time. For us, it whittles down our effort to stabilize the forex market. It has the potential to create panic, even though normalcy is gradually returning after the $ 3 billion emergency loan oil swap deal with Afriexim Bank,” a source in CBN said on Thursday.

Reacting to the controversy Hassan Mahmud, CBN Director, Monetary Policy Department, CBN, said on an AIT programme that JP Morgan is trying to destabilise the nation Forex market because “they must have their intentions to do that, whether to rouse market sentiments, whether to mislead the public.”

He said the CBN has enough in forex reserve to boost investors’ confidence, adding that fluctuations in forex reserve is not peculiar to Nigeria.

According to him, “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.

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

Following the $3 billion loan agreement between the Nigeria National Petroleum Company, NNPC Limited, and Afriexim Bank last week, keen watchers of the forex market insist that the volatility has reduced, particularly after the naira regained strength to less than N800 to the dollar from almost N950 it was traded in the previous weeks.

However, they insist that the respite provided by the loan could only last for a short time before currency speculators begin to take over the market again once the market begins to experience a shortfall in liquidity.

The CBN’s recently warned currency traders that they are likely to lose their investment as the market stabilizes.

“sooner rather than later, the speculators should be careful  because we believe the things we are doing, when they come to fruition may result in significant losses to them,” Acting CBN Governor Folashodun Shonubi said after a meeting with President Bola Ahmed Tinubu in Aso Rock, Presidential Villa.