CBN Loans May Cost Nigeria 40% of Foreign Reserves

Nigeria is currently faced with its worst economic turmoil in decades as the Central Bank of Nigeria’s (CBN) debt to some foreign banks may cost Nigeria 40.7 percent of its entire foreign reserves currently standing at $34.1 billion.

Data sourced from Nigeria’s apex bank 2022 report showed the CBN owes Goldman Sachs $500 million, JP Morgan $7 billion in securities lending, and another $6.3 billion owned in foreign currency forwards which are forex obligations it needs to make to foreign investors.

Calculations showed an ability to meet the above obligations due to FX shortages might cost Nigeria 40.7 percent of its $34.1billion foreign reserves.

Africa’s largest economy’s external reserves by virtue of statute are segregated into three distinctive portions, namely the CBN, the Federal Government of Nigeria (FGN) and the Federation reflecting ownership of the reserves.

The Central Bank receives foreign exchange inflows from crude oil sales and other sources of revenue on behalf of the government. Such proceeds are purchased by the Bank and the Naira equivalent is credited to the Federation account.

These proceeds are shared each month, in accordance with the constitution and the existing revenue-sharing formula. The monetized foreign exchange, thus, belongs to the CBN. It is from this portion of the reserves that the Bank conducts its monetary policy and defends the value of the Naira.