A global financial firm, JP Morgan says Nigeria’s net foreign exchange (FX) reserves fell to $3.7 billion as of 2022, contrary to $36.61 billion the Central Bank of Nigeria posted on August 17 on its website.
JP Morgan’s estimate is much lower than the net figure of $14 billion reported at the end of 2021.
This was contained in the bank’s latest report on Nigeria titled “Nigeria: Reform pause rather than fatigue”.
JP Morgan noted that the lower-than-reported forex reserve is the result of larger currency swaps and borrowings against the forex reserve.
It said: “Based on partial information from the audited financial accounts, we estimate that CBN’s net forex reserves were around $3.7 billion at the end of last year, from $14 billion at the end-2021.”
According to JP Morgan, the assumptions followed an addition of $5 billion in International Monetary Fund Special Drawing Rights (SDR) to external reserves to arrive at total gross forex reserves of US$37.8 billion.
This, it said, was broadly in line with the 30-day moving average of US$37.08 billion previously published on the central bank’s website.
It added that by adjusting the gross external reserves with three key forex liability lines that include forex forwards ($6.84 billion), securities lending ($5.5 billion) and currency swaps ($21.3 billion).
It estimated currency swaps by backing out forex forwards and outstanding Over The Counter (OTC) Futures balances from an overall aggregate published in the financial accounts.
According to The Nation, the global firm said the CBN could still withstand the pressure accompanying the low forex reserve especially, as profit from swap arrangements between the CBN and commercial banks, the rates will continue to rise.