By Chinwendu Obienyi
The Central Bank of Nigeria (CBN) has labeled JP Morgan’s report of $3.7billion estimate of Nigeria’s FX reserve as misleading and miscalculated.
The Director, Monetary Policy, CBN, Dr Hassan Mahmud, stated this during a programme monitored via Youtube at the weekend.
JP Morgan had estimated Nigeria’s net FX Reserve to be around $3.7 billion much lower than the net figure of $14 billion reported at the end of 2021. The global finance giant disclosed this in its latest report on Nigeria titled “Nigeria: Reform pause rather than fatigue”.
According to the report, the lower-than-reported FX reserve is the result of larger currency swaps and borrowings against the FX reserve. However, Mahmud noted that the CBN did not panic over JP Morgan’s numbers, indicating that the central bank had its in-house assessment of the situation.
“We also read JP Morgan numbers and in-house, we did not panic over that because this is not the first time that people, institutions, are reeling out numbers. They must have an intention for doing that, whether to rouse market sentiments or mislead the public”, Mahmud said.
He noted that the CBN has as much as possible tried to be transparent. “What I will say about those numbers is that it is just funny that reserves, just like an account balance, is a flow as there are changes that go on at any particular time. secondly, 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.”
Highlighting the concept of outstanding liabilities and their impact on the reported net balance, he argued that reducing the balance to account for the liability would not accurately reflect the individual’s current financial standing, as it ignores the future inflows that can cover the liability.
“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. I took a facility of $13 million, I know I will get $17 million in the next three years 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 is 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.”, Mahmud said.