A renowned United States financial service firm JP Morgan has revealed that as against details provided by the Central Bank of Nigeria (CBN), the estimated Nigeria’s net foreign reserve is around $3.7 billion not $33.8b.
The figure is far below the $33.8 billion as of August 17 on Central Bank of Nigeria (CBN) website.
According to JP Morgan’s estimate, the reserve is much lower than the net figure of $14 billion reported at the end of 2021.
The bank made this known in its latest report on Nigeria titled “Nigeria: Reform pause rather than fatigue”.
It noted that the lower-than-reported forex reserve is the result of larger currency swaps and borrowings against the forex reserve.
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 the bank, 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).
The 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.
CBN still can 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, the foreign bank said.