NIGERIA’s net foreign exchange reserves are significantly lower than previously estimated, J.P. Morgan Asset Management said in a report.

The leading global financial services firm made the revelation while analysing the Central Bank of Nigeria (CBN) financial accounts.

Reading the tea leaves from the CBN’s audited financial accounts, JP Morgan said the lousy aspect of the record lies in the decline in the country’s net FX reserves.

“Net FX reserves are significantly lower than previously estimated. 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 end-2021,” it stated.

A look at JP Morgan’s analysis revealed that total external reserves, which is a summation of external reserves and the International Monetary Fund’s (IMF) special drawing rights (SDR), fell from $40.7 billion or N17.69 trillion in 2021 to $37.4 billion or N17.24 trillion in 2022.

From the figure, the SDR declined from $5.3 billion or N2.31 trillion to $5.0 or N2.31 trillion in the review period.

Contrarily, the CBN total liabilities, which comprise FX forward, securities lending, and currency swap, rose from $26.7 billion or N11.59 trillion in 2021 to $33.7 billion or N15.55 trillion in 2022.

It means that when the total liabilities are deducted from the total external reserves, Nigeria’s net FX reserves fell from $14.0 billion or N6.10 trillion in 2021 to $3.7 billion or N1.69 trillion in 2022.

According to JP Morgan, in arriving at the estimated sum, there are a few assumptions which, if incorrect, would substantially change the picture.

The first assumption is an addition of $5.0 billion in the SDR to external reserves in order to arrive at total gross FX reserves of $37.8 billion, broadly in line with the 30-day moving average of $37.08 billion previously published on the central bank’s website.

The second is in adjusting the gross external reserves with three key FX liability lines that include FX forwards ($6.84bn), securities lending ($5.5bn) and currency swaps ($21.3bn).

And the third is estimating currency swaps by backing out FX forwards and outstanding OTC Futures balances from an overall aggregate published in the financial accounts.

With Nigeria Eurobonds starting maturing in 2025 and continued maturities from 2027, high debt-servicing needs and a relatively lower net FX position make it imperative to continue on the reform path to attract FX flows.

JP Morgan suggested, “Nigeria would need foreign direct and other portfolio investments to attract FX inflows. Thus, in our view, continuing on the reform path would be imperative to allay concerns on the external side.”

The ICIR had, on August 11, reported that the apex bank released its seven years of Consolidated Financial Statements from 2016 to 2022.

The release had got many stakeholders in the financial corridor talking and querying the rationale behind the apex bank withholding its account for so long.

“What a country called Nigeria,” the chief executive officer/principal partner of Afrique Capital and Equity Funds Limited, Kazeem Bello, lamented, expressing that in the United States, the Federal Reserves Bank releases its quarterly and annual financial statements that must be submitted to Congress; otherwise, no single dime would be approved for government spending, nor would Congress approve the Credit Ceiling limit.

“If the CBN cannot produce or release its Financial statements in over seven years, I am wondering why anybody would compel the Commercial Banks and other financial institutions to publish their account or how will the CBN that does not have any published account be interested in the financial statement of the Bank published or not.

“We need serious house cleaning in Nigeria, and we need to get serious for the sake of the economy,” Bello, a development economist, said.

Meanwhile, the financial statements showed that apex bank owes JP Morgan and Goldman Sachs a combined sum of $7.5bn as of the financial year ended December 2022.

Included as part of its liabilities is another $6.3bn owned in foreign currency forwards.

It revealed that 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 N0.23tn ($500m), 2021: N0.22tn ($500m), and JP Morgan N3.23tn ($7bn), 2021: N3.05tn ($7bn) is recognised in other foreign securities.