Apparently miffed by the figures reeled out by JP Morgan, a U.S-based bank with global reputation, as representing Nigeria’s total foreign reserves, the Central Bank of Nigeria (CBN) has flawed the recent estimate of the US bank on Nigeria’s foreign exchange reserves, describing it as a misrepresentation of the actual value of the reserves.
The apex bank’s Director of the Monetary Policy Department, Hassan Mahmud, while speaking on AIT on the JP Morgan’s figures, maintained that fluctuations, liabilities, and encumbrances to the reserves were only natural and normal.
The Director was not bothered about the estimate by the US bank about the nation’s foreign reserves since the apex bank had its in-house assessment position of the current level of the reserves.
He said: “We also read the JP Morgan numbers in-house and we didn’t panic over that. That’s not the first time we see people, institutions reeling out numbers; they must have their intentions to do that, whether to rouse market sentiments or to mislead the public.
“But the central bank has tried as much as possible to be transparent. What I will say about those numbers is that it is just funny in the sense that number one, reserves like any account balance, is a flow; there are changes that go within it at any particular time.
“Two, 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”, the banker added.
Mahmud, who elaborated on the concept of outstanding liabilities and their impact on the reported net balance in financial statements, pointed out that reducing the balance to account for the liability would not accurately reflect the individual’s current financial standing, as that will ignore the future inflows that can cover the liability.
He further clarified: “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. ore 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’s 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 stressed.
It would be recalled that JP Morgan had last week, in its latest report on Nigeria titled “Nigeria: Reform Pause Rather Than Fatigue”, estimated that Nigeria’s net FX reserve was hovering around $3.7 billion much lower than the $14 billion it reported at the end of 2021.
