Nigeria’s central bank has revealed substantial dollar transactions with JP Morgan and Goldman Sachs in documents that also confirm the bank exceeded limits on lending to the government.Thank you for reading this post, don't forget to subscribe!
The recently published annual financial statements, the first since 2015, detail two securities lending agreements with JP Morgan Chase & Co., amounting to $7 billion in 2021, and two with Goldman Sachs Group Inc., totalling $500 million.
Details about the securities pledged in exchange for funds were not disclosed. While Goldman declined to comment, JPMorgan and the central bank did not respond to comment requests.
The central bank’s financial statements, published on August 9, indicate a significant overshooting of the limit placed on lending to the government, set by statute at 5% of federal revenue. The bank’s actual lending figure at the end of 2022, totaling 23.18 trillion naira ($29.89 billion), exceeded the limit by 22.9 trillion naira.
The International Monetary Fund recently cautioned that the central bank’s continuous lending to the government has led to excess liquidity, suppressed interest rates, discouraged savings, and discouraged dollar inflows, potentially affecting naira stability.
This disclosure comes amidst naira volatility, dropping around 40% against the dollar since President Bola Tinubu eased foreign exchange regulations following his inauguration. His reforms have led to a surge in dollar bonds and stock market performance.
President Tinubu suspended central bank Governor Godwin Emefiele in June and initiated an investigation into the bank’s activities.
Emefiele had significantly expanded the central bank’s overdraft to the government since 2015, a response to the government’s robust borrowing to counter declining revenues from crude oil exports.
Nigeria’s total foreign debt for the period ending March 31st, 2023, has risen to N49.85 trillion ($108.30 billion), according to the Debt Management Office. This represents an increase from N46.25 trillion as of December 21st, 2022. The public debt encompasses external and domestic debts of the Federal Government, states, and the Federal Capital Territory.