Global financial service firm JP Morgan has estimated Nigeria’s FX Reserve to be around $3.7 billion much lower than reported figures of about $30 billion.
The bank disclosed this in its latest report on Nigeria titled “Nigeria: Reform pause rather than fatigue”. The bank noted that the lower-than-reported FX reserve is the result of larger currency swaps and borrowings against the FX reserve.
It stated thus, “Based on partial information from the audited financial accounts, we estimate that CBN’s net FX reserves were around US$3.7bn at the end of last year, from US$14.0bn at the end-2021.”
The bank, however, clarified it arrived at the $3.7 billion by making some assumptions which if incorrect will change the figure in their estimates.
These assumptions made in their report are:
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, “An addition of US$5.0bn in IMF Special Drawing Rights (SDR) to external reserves to arrive at total gross FX reserves of US$37.8bn, broadly in line with the 30-day moving average of US$37.08bn previously published on the central bank’s website.”
“Adjusting the gross external reserves with three key FX liability lines that include FX forwards (US$6.84bn), securities lending (US$5.5bn) and currency swaps (US$21.3bn); and”
“Estimating currency swaps by backing out FX forwards and outstanding OTC Futures balances from an overall aggregate published in the financial accounts.”
However, the report noted that the CBN still can withstand the pressure accompanying the low FX reserve especially, as profit from swap arrangements between the CBN and commercial banks, the rates will continue to increase.
The NNPCL also had to borrow $3 billion from the Afrexim bank to shore up the nation’s FX reserve is expected to ease liquidity in the exchange market.