Economy
CBN Faults JP Morgan’s $3.7bn Estimate of Nigeria’s Net Reserves
By Adedapo Adesanya
The Central Bank of Nigeria (CBN) has said the recent estimate of the country’s net external reserves by JP Morgan was “out of context”, and assured that there was no cause for panic.
Recall that Business Post earlier reported that the American investment bank said it estimated the value of Nigeria’s FX reserves at $3.7 billion against the $33.8 billion published by the apex bank.
Speaking on Money Line, a programme aired on Africa Independent Television (AIT), the Director of the Monetary Policy Department of CBN, Mr Hassan Mahmud, on Wednesday, said that fluctuations and liabilities encumbrances to the reserves were only natural and normal, adding that the apex bank built the reserves to defend the naira in terms of its value to other currencies.
He questioned the real intent of the report by the rating agency, saying, “Whether to rouse market sentiments, or whether to mislead the public?”
He stressed that the apex bank had tried as much as possible to be transparent in its operations.
Mr Mahmud also disclosed that CBN owned about 80 per cent of funds in reserves mainly to support the local currency in periods of volatility as well as boost the confidence of foreign investors, among others.
He stated, “We also read the JP Morgan numbers in-house, and we didn’t panic over that. That’s not the first time we have seen people and 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, as much as possible, tried 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.
“I can have $20 million in my account, and I owe 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. Because before I took a facility of $13 million, I know in the next three years, I will get $17 million, so I can pay you back.”
Mr Mahmud added, “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.
“Yes, there are liabilities encumbrances to the reserves, which is normal. The CBN built the reserves to defend the naira in terms of its value to other currencies, and close to 80 per cent of the reserves is CBN’s funds.”
The CBN director also said, “When the federal government or the oil export receipts come to Nigeria, it comes through the central bank. The CBN monetises that to naira, and the federal government spends the naira in the implementation of its budget.
“So, that dollar component sits with the central bank, and the purpose of the dollar component, one, is to build the confidence of the international community in the capability of the central bank to meet its trade commitment, and so you will see measurements around what months of imports either goods and services or goods only can your reserves cover?
“That gives some confidence to foreign investors trading with Nigerian investors in terms of import and export. Two, in the event that, for example, we have a float-managed exchange rate regime – in the event that the value of your currency is significantly depreciating or appreciating or whatever direction it is going – the central bank has the firepower to intervene in the market such that you bring the price to your expected or optimal equilibrium rate.”
Mr Mahmud further stated, “So, that is what the reserve is meant for – the reserve is not meant for just trading – in the event that there are also shortfalls in the build-up of those reserves, you can take a swap or other engagements that are legally allowed by the CBN Act over the short period of time.
“The exchange rate, like we mentioned several times, is also part of the tools to address price stability, including leading to inflation and all that.
“So, the reserves are tools we can comfortably use to build investors’ confidence in the Nigerian economy and also build the sovereign confidence in terms of our exposures to multilaterals the CBN is owing and service its debts.
“So, people do all those calculations. Okay, for example, we have some government loans that are for 10 years, and there is annual service interest that you are supposed to pay to amortise those loans.”
He stressed, “If you come today and sum up the entire facility, maybe $20 billion, and you say the federal government owes $20 billion for the past 10 years; if you remove that $20 billion from the $33 billion, you have only N3 billion to service your debt, that’s wrong because there’s going to be inflows; the federal government is going to earn some monies.
“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.”
By Adedapo Adesanya
Food Concepts Plc neutralized the gains recorded by three securities, returning the NASD Over-the-Counter (OTC) Securities Exchange into the negative territory with a 0.27 per cent loss on Thursday, December 4.
Yesterday, the share price of the parent company of Chicken Republic and PieXpress declined by 34 Kobo to sell at N3.15 per unit compared with the previous day’s N3.49 per unit.
This shrank the market capitalisation of the OTC bourse by N5.72 billion to N2.136 billion from N2.142 trillion and weakened the NASD Unlisted Security Index (NSI) by 9.57 points to 3,571.53 points from 3,581.10 points.
Business Post reports that Central Securities Clearing System (CSCS) Plc went down by 50 Kobo to N38.50 per share from N38.00 per share, FrieslandCampina Wamco Nigeria Plc gained 29 Kobo to sell at N55.79 per unit versus N55.50 per unit, and Geo-Fluids Plc added 5 Kobo to close at N4.60 per share compared with Wednesday’s closing price of N4.55 per share.
Trading data indicated that the volume of securities recorded at the session surged by 6,885.3 per cent to 4.3 million units from the 61,570 units posted a day earlier, the value of securities increased by 10,301.7 per cent to N947.2 million from N3.3 million, and the number of deals went up by 146.7 per cent to 37 deals from the 15 deals achieved in the previous trading session.
At the close of business, Infrastructure Credit Guarantee Company (InfraCredit) Plc was the most traded stock by value on a year-to-date basis with the sale of 5.8 billion units for N16.4 billion, trailed by Okitipupa Plc with 170.4 million units worth N8.0 billion, and Air Liquide Plc with 507.5 million units valued at N4.2 billion.
InfraCredit Plc also finished the session as the most traded stock by volume on a year-to-date basis with 5.8 billion units transacted for N16.4 billion, followed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.2 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.
By Dipo Olowookere
The upward trend witnessed at the Nigerian Exchange (NGX) Limited in recent sessions continued on Thursday as it further improved by 0.10 per cent.
This was despite investor sentiment turning bearish after the local equity market ended with 23 price gainers and 28 price gainers, indicating a negative market breadth index.
UAC Nigeria gained 10.00 per cent to finish at N88.00, Morison Industries appreciated by 9.94 per cent to N3.54, Ecobank rose by 8.53 per cent to N36.90, and Coronation Insurance grew by 8.47 per cent to N2.56.
On the flip side, Ellah Lakes depreciated by 10.00 per cent to N13.14, Eunisell Nigeria also shed 10.00 per cent to finish at N72.90, Transcorp Hotels slipped by 9.95 per cent to N157.50, Omatek shrank by 9.23 per cent to N1.18, and Guinea Insurance dipped by 8.46 per cent to N1.19.
Yesterday, the All-Share Index (ASI) went up by 152.28 points to 145,476.15 points from 145,323.87 points and the market capitalisation chalked up N97 billion to finish at N92.726 trillion compared with the previous day’s N92.629 trillion.
Customs Street was bubbling with activities on Thursday, though the trading volume and value slightly went down, according to data.
A total of 1.9 billion stocks worth N19.2 billion exchanged hands in 23,369 deals during the session versus the N2.3 billion valued at N21.0 billion traded in 21,513 deals a day earlier.
This showed that the number of deals increased by 8.63 per cent, the volume of transactions depleted by 17.39 per cent, and the value of trades decreased by 8.57 per cent.
For another trading day, eTranzact led the activity chart with 1.6 billion units sold for N6.4 billion, Fidelity Bank traded 31.0 million units worth N589.3 million, GTCO exchanged 28.3 million units valued at N2.5 billion, Zenith Bank transacted 27.1 million units for N1.6 billion, and Ecobank traded 21.9 million units worth N744.3 million.
By Adedapo Adesanya
The Naira marginally depreciated against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Thursday, December 4 amid renewed forex pressure associated with December.
At the official market yesterday, the Nigerian currency lost 0.01 per cent or 18 Kobo against the Dollar to close at N1,447.83/$1 compared with the previous day’s N1,447.65/$1.
It was not a different scenario with the local currency in the same market segment against the Pound Sterling as it further shed N15.43 to sell for N1,930.97/£1 versus Wednesday’s closing price of N1,925.08/£1 and declined against the Euro by 20 Kobo to finish at N1,688.74/€1 compared with the preceding session’s N1,688.54/€1.
Similarly, the Nigerian Naira lost N5 against the greenback in the black market to quote at N1,465/$1 compared with the previous day’s value of N1,460/$1 but closed flat against the Dollar at the GTBank FX counter at N1,453/$1.
Fluctuations in trading range is expected to continue during the festive season as traders expect the Nigerian currency to be stable, supported by intervention s by to the Central Bank of Nigeria (CBN)in the face of steady dollar demand.
Support is also expected in coming weeks as seasonal activities, particularly the stylised “Detty December” festivities, will see inflows that will give the Naira a boost after it depreciated mildly last month, according to a new report.
“As the festive Detty December season intensifies, inbound travel, tourism spending, and diaspora inflows are expected to provide moderate support for FX liquidity,” analysts at the research unit of FMDA said in its latest monthly report for November.
Traders cited by Reuters expect that the Naira will trade within a band of N1,443-N1,450 next week, buoyed by improved FX interventions by the apex bank.
Meanwhile, the crypto market was down as the US Federal Reserve’s preferred inflation gauge, core PCE, likely rose in September—moving in the wrong direction. However, volatility indices show no signs of major turbulence.
If the actual figure matches estimates, it would mark 55 straight months of inflation above the US central bank’s 2 per cent target. The sticky inflation would strengthen the hawkish policymakers, who are in favour of slower rate cuts.
Ripple (XRP) depreciated by 4.5 per cent to $2.08, Solana (SOL) went down by 3.8 per cent to $138.11, Litecoin (LTC) shrank by 3.1 per cent to $83.23, Dogecoin (DOGE) slid by 2.5 per cent to $0.1463, Cardano (ADA) declined by 2.1 per cent to $0.4368, Bitcoin (BTC) fell by 0.9 per cent to $91,975.45, Binance Coin (BNB) crumbled by 0.9 per cent to $899.41, and Ethereum (ETH) dropped by 0.7 per cent to $3,156.44, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 apiece.
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