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CBN’s financial challenges worsen, may become bankrupt

by Daudu John

CBN’s financial challenges worsen, may become bankrupt

Apex bank spends 97% of assets on liabilities
For every N100 asset of the Central Bank of Nigeria, N97 has been used to pay total liabilities, a pointer to how the apex bank fiscal crisis has moved from bad to worse.

More than anything, the rapid growth in the CBN’s bailout for the Federal Government since 2014 has exposed how the apex bank’s financial challenges have worsened in 2019.

Of the total assets of N57.9 trillion, CBN incurred total liabilities of N56.3 trillion in 2022, implying that the apex bank spent 97 percent of its total assets paying liabilities.

“The CBN is basically a stone throw from being technical solvent,” Kelvin Atafiri, managing partner at Cavazanni Capital Limited said.

Technical insolvency means when the value of a company’s liabilities rises at a faster rate than that of its assets due to increased debts or borrowings.

Further findings showed the CBN recorded total assets of N52 trillion compared to a total liability of N52 trillion in 2021.

In 2020, the apex bank recorded total assets of N45.8 trillion compared to total liabilities of N44.7 trillion.

The CBN also posted a total asset of N38.2 trillion compared to N37 trillion in 2019.

For the first time since 2015, the CBN has finally released its long-awaited audited accounts, posting a profit of N103.8 billion in 2022, the highest since 2017.

The results, which are published on the CBN website, also had audited results for the last six years which showed the apex bank recorded a profit of N124.4bn in 2016; N107.3bn in 2017; N43.7bn in 2018; N34.6bn in 2019; N30.8bn 2020 and N75.1bn in 2021.

Further findings showed the loans to the Federal Government also known as ‘Ways and Means’ totaling N23 trillion earned interest of N1.9 trillion for the apex bank compared to N1.2 trillion in the prior year.

The apex bank’s results reported that it earned an additional N247 billion and N156 billion from Asset Management Company of Nigeria and Federal Government securities respectively.

The consolidated financial statements also revealed Nigeria’s central bank owes JP Morgan and Goldman Sachs a combined sum of $7.5 billion as of the financial year ended December 2022.

Also included as part of its liabilities is another $6.3 billion owned in foreign currency forwards.

“The Group entered into a securities lending agreement with Goldman Sachs and J. P. Morgan and as part of the agreement, the Group pledged its holdings on foreign securities in return for cash. The cash received from Goldman Sachs is N0.23 trillion ($500 million), 2021: N0.22 trillion ($500 million), and JP Morgan N3.23 trillion ($7 billion), 2021: N3.05 trillion ($7 billion) is recognized in other foreign securities,” the apex bank said.

The CBN’s results showed that it had reported a profit after tax every year for the last eight years, despite facing currency depreciations and doling out intervention funds and loans to the government, among other development finance activities.

Until now, the results had been withheld from the public under former CBN Governor, Godwin Emefiele.

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