Audited financial statements released by the Central Bank of Nigeria (CBN) showed unevaluated lending to the Federal Government and other financial institutions, revealing poor oversight by Nigeria’s National Assembly.
The apex bank released the Consolidated Financial Statements for the last seven years, making it the first time since 2015 it will be making its book available for public scrutiny.
The released Consolidated Financial Statements are for 2016, 2017, 2018, 2019, 2020,2021 and 2022.
According to the CBN Act 2007, the apex bank is expected to publish its report within two months after the end of each financial year.
The ICIR has reported persistently reported how the CBN kept violating its extant laws by overlending to the Federal government to the tune of N23.18 trillion, a situation that has seen Nigeria pressured with higher inflation.
The concern was further worsened by the apex bank owing JP Morgan and Goldman Sachs a combined sum of $7.5 billion as of the financial year ended December 2022.
Also included as part of its liabilities is another $6.3 billion owned in foreign currency forwards.
This is contained in the audited financial statements of the apex bank, gazetted and published on its website.
CBN in the report, stated it owes Goldman Sachs $500 million and JP Morgan $ 7 billion in what it classified as securities lending.
“The Group entered into a securities lending agreement with Goldman Sachs and J. P. Morgan, and as part of the agreement, the Group pledged its holdings on foreign securities in return for cash.
The cash received from Goldman Sachs is N0.23 trillion ($500 million), 2021: N0.22 trillion ($500 million), and JP Morgan N3.23 trillion ($7 billion), 2021: N3.05 trillion ($7 billion) is recognised in other foreign securities.”
The securities lending forms part of the CBN’s total external reserves of about N14.3 trillion or $29 billion using the official exchange rate of N494/$1 as of 2022.
However, the apex bank also owes another N3.15 trillion ($6.3 billion) in foreign currency forward which are forex obligations it needs to make to foreign investors.
The Senate President Godswil Akpabio said in an earlier report by The ICIR that the Senate has plans to amend some sections of the CBN Act to whittle down the powers of the CBN governor on some key decisions.
He also admitted that the Senate has not performed its oversight optimally, which prompted the risk exposure of the CBN to the Nigerian economy, as seen by several of its poor decisions.
Economists and Industry analysts are worried that the risk exposure of not publishing the audited financial statement is huge, as they cited further violation of CBN extant laws.
“CBN, according to extant laws is expected to publish its accounts two months after its financial year. Accountability and transparency are key as the new government takes charge, and I suggest they become consistent with the publication. There are several bad loans and issues, “an economist analyst, Chuka Mbonu, said.
“The CBN is a bank to the Federal Government and bank to Nigerians. The apex bank makes money by lending. In the statement, total lending to the Federal Government in ways and means is above N23 trillion. They are making money via interventions, lending, treasury bills and licenses they issued,” Mbonu said.
For development economist Kelvin Emmanuel, the Acting CBN Governor publication of the audited financial statements showed deeper problems on how the apex bank has been managed over time.
“Remember I said about two weeks ago that some senior treasury officials and portfolio managers told me privately that they don’t believe the official foreign numbers of the CBN?
“It is commendable that the Acting Governor has bitten the bullet in line with sections 50(1)(3) of the CBN act, to publish the accounts of the Central Bank to the Senate and Gazette it to the public,” said Emmanuel.
Emmanuel noted that the situation is bad, but admitting that there’s a problem is the first step to solving it.
Experts worried about external reserves and foreign exchange management
Following the release of the CBN financial statements, Nigerians and the global community are getting to know the state of Nigeria’s financial health as managed by the apex bank.
Analysts who also spoke with The ICIR argued that the CBN debts to foreign companies were worsened by how the apex bank managed the country’s foreign exchange market and external reserves.
The financial statements seem to have exposed the CBN management of the country’s external reserves in past years, the head of financial institutions ratings at Agusto and Co, Ayokunle Olubunmi, told The ICIR.
“Since 2015, the CBN has faced many issues in terms of managing foreign exchange and not disclosing its accounts. It was apparent that something was not right.
“We could have so much at our reserves and have issues with foreign exchange management. On the surface, it looks as if the reserves are enough to meet our foreign exchange needs, but on the other hand, we are saying there are issues in the foreign exchange market, Olubunmi said.
The hallmark of the last CBN administration has been to hoard information and keep many things undisclosed.
According to him, it is clear why foreign exchange market issues persisted as it is evident that the funds that CBN had were encumbered – owing somebody and keeping it as part of reserves.
“Although it is one of the ways of managing the foreign exchange, it requires care that by the time the facility is due, the CBN has the funds to repay it.
“Where we should be concerned is that if we take the debts out from the reserves, what is left of the reserves? Olubunmi asked.
“I have maintained that based on the global market facts and records that Nigeria’s foreign reserves is around $22 billion net account balance,” a development economist, Kazeem Bello, said.
Bello, chief executive officer and principal partner of Afrique Capital and Equity Funds Limited established that when the $13 billion is net out from the about $34 billion external reserves, it could mean that Nigeria would have appropriately $22 billion in its reserves.
He said, “Contrary to CBN posture, global investors dumped and shunned the Nigerian forex investment simply because of consistent evidence of round tripling and illegal arbitrage that does not make genuine investors make real investment accrue benefits or make cognate investment choices.
“We are now learning from the CBN that inflows dropped from $23 billion in 2019 to $6 billion in 2022. The answer is simple and foreign investors will not stake trading bets on a manipulated or fraudulent market.
The development economist said he cannot still comprehend how the CBN could have been authorised to create or get into a debt obligation that ultimately results in cash debt to Goldman Sachs and JP Morgan to the tune of $13 trillion.
“Who authorised that debt obligation, and what did the CBN use it to settle or pay for? These and several questions should be raised and investigated,” Bello said.
Who authorised that debt obligation, and what did the CBN use it to settle or pay for? These and several questions should be raised and investigated
The latest disclosure have made it clear that the Nigerian debt structure has swelled from N77 trillion as left behind by the immediate past administration with the addition of a whopping $13 billion debt incurred by the disposed CBN governor, he pointed out.
Foreign Direct Investment (FDI) dropped from over $23 billion under President Goodluck Jonathan’s administration at a point in time to $6 billion in 2022 under President Muhammadu Buhari.
Bello said contrary to the impact of the Covid 19, Egypt, South Africa, Morocco, Senegal, Kenya, Angola, Cote de Ivoire and other countries all recorded net increases in FDIs within the same time frame that Nigeria was bitterly losing those FDIs.
During the period, Nigeria was also confronted with an unprecedented capital flight, which as of 2021, ending in a relative comparative analysis, was about $25 billion in less than 10 years.
For a country struggling with huge infrastructure deficits, declining economic fortunes and massive unemployment and declining industrial productivity, this was seriously unhealthy and needed to be reversed, Bello said.
Despite being the largest economy in Africa, unfortunately, Nigeria ranked as one of the lowest in FDIs in the continent in recent years.
“We surely will see more until the new government move into place to ascertain the proper financial health of the apex bank and take cognate responsibility to amend this problem.
He, however, urged the new administration to move quickly with the proposed reforms at the apex bank and get the place sanitised appropriately.
“This is the fastest way to reassure the foreign investors and gain their confidence in the market,” Bello asserted.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.