Nigeria’s net foreign exchange (FX) reserves decreased to $3.7 billion as of 2022, according to a worldwide financial institution, JP Morgan, as opposed to the $36.61 billion the Central Bank of Nigeria reported on its website on August 17.
The $14 billion net number revealed at the end of 2021 is substantially lower than JP Morgan’s expectation.
This was stated in the bank’s most recent report on Nigeria, “Nigeria: Reform pause rather than fatigue”.
JP Morgan pointed out that greater currency swaps and borrowings against the forex reserve are to blame for the lower-than-reported forex reserve.
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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.”
JP Morgan claims that the assumptions included the addition of $5 billion in Special Drawing Rights (SDR) from the International Monetary Fund to external reserves, resulting in total gross foreign exchange reserves of US$37.8 billion.
It claimed that this was roughly in line with the 30-day moving average of US$37.08 billion that was previously posted on the website of the central bank.
By adjusting the gross external reserves for three significant foreign exchange liability lines—forex forwards ($6.84 billion), securities lending ($5.5 billion), and currency swaps ($21.3 billion)—it further said that.
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By subtracting outstanding Over The Counter (OTC) Futures balances and foreign exchange forward balances from an overall sum that was stated in the financial accounts, it assessed currency swaps.
The worldwide corporation, according to the newspaper, claimed that the CBN could still survive the strain brought on by the low foreign reserve, especially since the CBN and commercial banks’ profit from swap agreements will only lead to further rate increases.
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