Global financial service firm, JP Morgan has 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 bank disclosed this in its latest report 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 by the past administration.
The bank however admits that it made the assumption to arrive at the $3.7bn FX reserve “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.”
“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 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.
Recently The Nigerian National petroluem company limited borrowed $3 billion from the Afrexim bank to shore up the nation’s FX reserve expecting to ease liquidity in the exchange market.
JP Morgan also predicted headline inflation to reach 28% by the end of this year on the back of rising food prices and other impacts of the President Bola Tinubu reforms.
-JP-Morgan Projects
