Why we borrowed from JP Morgan and Goldman Sachs-CBN
By Patience Ikpeme
The Central Bank of Nigeria CBN says it borrowed dollars in cash from two American banks, JP Morgan and Goldman Sachs in order to stabilize the economy and exchange rate.
The apex bank was responding to the outcry that followed the release of its audited financial statements.
The CBN borrowed N3.1 trillion ($7 billion) and N230 billion ($500 million) from global lenders JP Morgan and Goldman Sachs.
A board member of the CBN said, “the limited foreign exchange reserves and minimal accretion to foreign exchange reserves necessitated temporary borrowing from international financial organizations”.
“The borrowed funds were used to support the reserves position, exchange rate, and financial sector” the board member said.
He explained that Nigerians’ insatiable demand for foreign exchange caused the borrowing, stressing that “if the country lived within its means, there would be no need to borrow from international organizations”.
The CBN he said, “hopes that resolving issues like oil theft and increasing foreign investments will improve the stock of reserves and exchange rate”.
He reassured Nigerians that “there was no need to panic because the borrowed funds were not earned by the CBN and were only necessary to prevent a panic situation in the foreign exchange market”.
Also speaking to the issue of the CBN’s audited financial statements, the Debt Management Office (DMO) has distanced itself from the dollars borrowed by the CBN from the two American banks.
Ms Patience Oniha, the Director General of the DMO said her agency did not borrow the money for the federal government.
Based on her statement, she questioned if the report stated that the CBN borrowed money on behalf of the Federal Government of Nigeria (FGN).
In response to criticisms, Oniha defended her Office by asserting that the DMO did not conceal any information.
She explained that the reason why the DMO did not include the CBN’s borrowings or foreign currency forwards obligations in their reports was not an act of hiding anything.
As stated in the CBN’s audited financial statements, they disclosed that they received N3.1 trillion ($7 billion) and N230 billion ($500 million) from JP Morgan and Goldman Sachs respectively. Additionally, they have an outstanding debt of N3.15 trillion ($6.3 billion) due to foreign currency forward obligations that have to be paid to foreign investors.
The report highlights that a significant portion of loans and receivables were attributed to the CBN’s lending to the government, contributing N610 billion to the overall impairment loss and credit loss expenses. This accounts for 74% of the total loans.
Additionally, the CBN faced significant costs associated with foreign exchange and loan impairments, with N888.3 billion labeled as “other operating expenses” in the report (compared to N884.2 billion in 2021).
Out of this sum, almost half, amounting to N346.2 billion, accounted for losses resulting from foreign exchange revaluation.
Furthermore, N155.5 billion was attributed to “rebate expenses,” which the CBN clarified were connected to policies such as RT 200 and Naira4Dollar.
These initiatives were implemented under the guidance of former CBN Governor Godwin Emefiele with the intention of attracting foreign exchange inflows.
