CBN faults JP Morgan’s $3.7bn FX reserves estimate

The Central Bank of Nigeria (CBN) has found itself at odds with JP Morgan over the estimation of Nigeria's foreign exchange reserves. JP Morgan's estimate of $3.7 billion has been refuted by the CBN, which asserts that the reserves actually stand at approximately $37.8 billion. The discrepancy has raised concerns about the country's currency stability and economic outlook. In a recent interview on CNBC Africa, Sam Chidoka, CEO of Kairos Capital, shed light on the differing views between JP Morgan and the CBN regarding the foreign reserves. Chidoka highlighted the complexities involved in assessing the reserves, noting that liabilities and future obligations must be taken into account. While the CBN emphasizes the potential for future growth and repayment of loans, JP Morgan's estimate reflects a scenario where all liabilities are realized immediately. Chidoka expressed agreement with the CBN's stance on the reserves but also voiced concern about the current level of reserves. He emphasized that regardless of the estimation method used, Nigeria's reserves should ideally be higher given the country's past performance in this area. The discussion shifted to the CBN's efforts to bolster the reserves, with a focus on crude oil receipts as a key driver of reserve accumulation. However, challenges such as oil theft and production shortfalls have hindered Nigeria's ability to meet OPEC production quotas. Chidoka underscored the need for increased investment in upstream assets and enhanced security measures to address these issues. Regarding the Nigerian Naira's performance, Chidoka highlighted the disparity between the official window and the parallel market exchange rates. He noted that the parallel market remains a significant source of dollar supply for many Nigerians, underscoring the importance of addressing supply constraints to stabilize the currency. The interview also touched on the Finance Minister's call for discipline in money supply to combat inflationary pressures. With money supply rising by 31.6% year-on-year to 64 trillion Naira in July, concerns have been raised about the impact on inflation. Chidoka stressed the need for coordinated efforts between monetary and fiscal policies to ensure sustainable economic management. In conclusion, the interview with Sam Chidoka provided valuable insights into the complexities surrounding Nigeria's foreign reserves, currency stability, and inflation management. As the country navigates these challenges, the importance of prudent economic policies and strategic interventions cannot be overstated.