The Central Bank of Nigeria released its financial report on Friday for the first time in seven years, revealing it took hefty loans from American banks U.S. banks Goldman Sachs and JP Morgan.
The central bank released reports for 2016 to 2022, and said it borrowed $7.5 billion from JP Morgan and $500 million from Goldman Sachs using its securities as collateral.
“The Group entered into a securities lending agreement with Goldman Sachs and J.P. Morgan,” it said.
“As part of the agreement, the Group received cash in exchange for its securities to be held as collateral for the loan. J.P. Morgan being the global custodian of the securities of the (CBN) Group holds an equivalent in securities, of value of loan given in cash.”
The central bank also revealed in the 2022 report that it had commitments to provide as much as N14.59 trillion ($19 billion) equivalent of forex under forwards, futures, and swap contracts. There was also a 30-day forward contracts totalling N3.15 trillion.
The deals, categorized as derivatives, allow benefitting parties, typically companies, buy foreign exchange at guaranteed rates in future to avoid volatility.
The CBN did not disclose the parties involved in the contracts.
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- Naira hits N860 at black market, a blow to moves to unify exchange rates
- Naira trades below N810 on official market, weaker than black market
– Why this matters
The figures give a glimpse how the central bank was managed for years under ousted governor Godwin Emefiele. Mr Emefiele was suspended in June by President Bola Tinubu and has remained in the custody of the State Security Service since.
Added together, the loans to the U.S. banks and the forex commitments translate to about 40% of Nigeria’s foreign reserves of $34.1 billion, and raises concerns about the ability of the bank to meet its commitments.
– Eurobond falls
Investors reacted to the reports by pricing down Nigeria’s dollar-denominated bonds on Friday.
Eurobond maturing in 2030 fell the most, down 2.295 cents to 83.221 cents, its lowest level in a month, according to Reuters.
An economist who spoke to Reuters said the CBN reports show why the level of dollar inflows into Nigeria has not risen to the anticipated levels despite recent reforms seeking to attract foreign investors.
“The central bank’s annual report is discomforting and confirms why the unification of the exchange rates and adjustments of yields on treasury bills did not attract the volumes required to settle FX backlogs,” said economist Kelvin Emmanuel.
Naira has struggled with inflation as well as high demand for dollars, losing more than 60% since reforms were introduced in June.
The currency traded at above 930 to a dollar this week at the black market and closed at ₦740.60 on the official window on Friday.
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