Shocking: JP Morgan Puts Nigeria’s FX Reserves at $3.7bn, Against $37.15bn as of December 2022 (thewillnews.com)

August 21, (THEWILL) – Global financial service firm JP Morgan has estimated Nigeria’s net FX Reserve to be around $3.7 billion which far contradicts the $37.15 billion reported by the Central Bank of Nigeria (CBN) as of December 31, 2022.

Data from the CBN showed that the nation’s external reserves fell by $3.23 billion or 8.5 per cent to $33.92 billion on July 9 from $37.15 billion on December 31st 2022.

JP Morgan disclosed the $3.7 billion in its latest report on Nigeria titled “Nigeria: Reform pause rather than fatigue”, stating that the lower-than-reported FX reserve is the result of larger currency swaps and borrowings against the FX reserve.

Part of the report reads:

“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 that it arrived at the $3.7 billion by making some assumptions which if incorrect will change the figure in their estimates.

The assumptions made in their report are:

“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.”

The bank however noted that the CBN still can withstand the pressure accompanying the low FX reserve especially, stressing that with the profit from swap arrangements between the CBN and commercial banks, the rates will continue to increase.