The Nigerian central bank had a 13.9 trillion naira ($9 billion) loss on the settlement of overdue derivatives contracts in 2024 as it tried to prune foreign currency liabilities on its balance sheet and restore investor confidence on available measures to support the naira.
The loss on settled derivatives contracts more than doubled from 6.3 trillion naira in 2023 as the lender redeemed “legacy transactions” to “reduce outstanding foreign exchange liabilities, thus lowering its FX exposure,” boost net foreign reserves and external buffers, the Abuja-based Central Bank of Nigeria said in emailed statement.
The central bank in 2023 published its finances as part of measures to assure investors of transparency in the running of the lender as well as foreign exchange management. This was being reformed to remove capital controls, enable the naira trade freely and lure inflows, required to end acute dollar shortage.
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The financial report raised questions on the true size of Nigeria’s external reserves and the central bank’s capacity to support the naira as the lender disclosed large deals with JPMorgan Chase & Co. and Goldman Sachs Group Inc. involving foreign-currency pledges for cash to support government revenue. The central bank responded in April that it has settled the deals, including swaps and forwards contracts to bring the nation’s net foreign-currency reserves to $23 billion as of December.
Gross external reserves for the West African nation rose for a third day to $37.9 billion as of April 30, the highest in three weeks, according to latest data tracked by Bloomberg. The naira has lost about 71% of its value versus the dollar since June 2023, when President Bola Tinubu implemented the foreign currency reforms.
Liquidity management costs arising from the sale of high-yielding short-tenured fixed income securities intended to mop up excess liquidity, tame inflation and rein in the naira, rose to 4.5 trillion naira in 2024 from 1.5 trillion naira in the previous year, the central bank said. The lender is committed “to external sector stability, ensuring Nigeria is better positioned to meet its international obligations, stabilize the naira, and boost macroeconomic confidence,” it said.
