August 16, 2023/CSL Research
After a long wait, the Central Bank of Nigeria released its consolidated and separate financial statements for the first time since 2015. This follows President Bola Ahmed Tinubu’s order to the appointed special investigator -CEO of Financial Reporting Council of Nigeria, Jim Obaze to probe CBN activities two weeks earlier. It appears the CBN has not been complying with the provisions of section 50(1) of the CBN Act which compels the CBN to within two months after the close of each financial year, to transmit to the National Assembly and the President a copy of its annual accounts certified by the Auditor.
The report shows Interest Income from loan and receivables, AMCON, FG securities and other foreign securities grew by 43.2% y/y to N3.29trn from N2.3trn, while Interest Expense grew by 16.93% y/y. Operating Income dropped significantly by 47.8% y/y to N326.1bn from N624.59bn.
The apex bank reported Net Profit of N103.85bn, a 38.24% y/y growth. Even though the income statement showed improved profitability largely due to interest gained from loans to the Federal Government, the debt to asset ratio of 97% appears high to us.
Also, it is noteworthy that there’s disparity of US$4.9bn between the external reserve balance shown on CBN website as of December 2022 (US$37.1bn) and the one reported in the balance sheet (US$32.2bn). Though the CBN reports gross numbers, if we net off the securities lending of US$7.5bn owed to Goldman Sachs and JP morgan, and the US$6.8bn FX forward payable as of December 2022, the nation’s net reserve figures as of December 2022 will be c.US$17.9bn compared with the gross figure of US$37.1bn reported. We opine that with stretched FX reserves, CBN has very little means of defending Naira and we could see rates decline further at the I&E window.
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