Insists overseas reserves not unusual financial savings, however safety in opposition to disruptions
Admits Nigeria wants extra rigorous evaluation of value of sustaining reserves
Calls for clear reserve adequacy benchmarks, quarterly disclosures
Emmanuel Addeh in Abuja
The Chairman of the Alliance for Economic Research and Ethics (AERE), Dele Oye, yesterday faulted claims that Nigeria may very well be dropping greater than $10 billion yearly from holding overseas reserves, arguing that the calculation fails to account for the completely different currencies, financing preparations and dangers concerned.
Oye, a lawyer, mentioned though the nation’s reserve accumulation carries a value and must be subjected to rigorous financial scrutiny, subtracting an estimated 3 per cent return on overseas property from an assumed 20 per cent naira funding value doesn’t set up the Central Bank of Nigeria (CBN) precise value of sustaining its exterior reserves.
Responding to feedback by former Fidelity Bank chairman and former Managing Director of the Asset Management Corporation of Nigeria (AMCON), Mustafa Chike-Obi, Oye mentioned Nigeria wanted a extra rigorous evaluation of how a lot it prices to keep up its reserves, what dangers they defend the economic system in opposition to and the way a lot the nation ought to maintain to resist exterior shocks.
In a coverage essay dated October 18, 2026, Oye mentioned Chike-Obi had raised an necessary query concerning the financial implications of accumulating overseas reserves, however argued that the conclusion drawn from the interest-rate differential was not supported by ample proof.
More essentially, Oye argued that the calculation in contrast the return on dollar-denominated property with an assumed naira funding value with out establishing how the reserves have been financed or the precise prices and dangers related to sustaining them.
“The useful conclusion is therefore neither that reserves are free nor that Nigeria is burning US$10 billion every year. The useful conclusion is harder and more valuable: Nigeria needs a transparent, country-specific answer to the question, adequate for what, against which shocks, and at what marginal cost?” he maintained.
Chike-Obi had argued that Nigeria’s overseas reserves earned about 3 per cent yearly whereas the price of naira funds used to assist them was round 20 per cent, creating a possible 17-percentage-point annual loss if the change charge remained unchanged.
But Oye mentioned the argument contained an necessary financial consideration however couldn’t, with out additional proof, be handled as an correct measure of the nation’s annual monetary loss.
He defined that the naira rate of interest and the return on greenback property mirrored completely different currencies, dangers and financing preparations. A correct comparability, he defined, must account for exchange-rate actions, hedging prices, the maturity of the devices concerned and the precise yields on the liabilities used to finance or sterilise reserve accumulation.
Oye maintained that the price of reserve accumulation must be measured in opposition to the safety the property present when oil receipts decline, overseas funding retreats, exterior borrowing turns into tough or strain mounts on the naira.
He argued that overseas reserves weren’t unusual financial savings that may very well be judged solely by the curiosity they earned, however a type of safety in opposition to disruptions that might in any other case destabilise the economic system.
“An insurance policy appears wasteful in calm weather because the storm has not yet arrived,” he mentioned. “The question is never whether insurance earns as much as risk capital in fair weather. The question is whether the country can survive the event for which the insurance exists,” he identified.
Oye acknowledged that Nigeria’s reserve place had improved considerably, however mentioned the headline determine wanted to be assessed alongside the quantity available to be used, current overseas obligations and the nation’s publicity to exterior shocks.
The former President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) mentioned the scale of the gross reserve stability didn’t imply that the whole quantity was freely out there to the federal authorities for expenditure.
He defined that the nation’s exterior reserves included distinct parts attributable to the CBN, the federal authorities and the federation, whereas the headline stability additionally wanted to be examined alongside liquid property, encumbered funds and internet worldwide reserves.
“A large gross balance can therefore be a sign of improved resilience without being freely spendable national cash,” he mentioned.
The former Chairman of the Organised Private Sector of Nigeria (OPSN) additionally underscored the significance of distinguishing between gross reserves, liquid holdings and internet reserves when assessing the nation’s capability to resist exterior strain.
The AERE chairman warned in opposition to proposals that might routinely switch reserves above a predetermined threshold right into a fund for home improvement initiatives or routine debt compensation.
He argued that such an association may blur the excellence between financial reserves and financial financial savings, probably exposing the nation to pointless monetary and authorized dangers.
“The federal budget needs revenue, borrowing authority and fiscal institutions. The CBN needs a reserve buffer and a balance sheet fit for monetary stability,” he acknowledged. “These are related national accounts, but they are not the same wallet,” he added.
He contrasted the statutory import-cover situation with the IMF’s projection of roughly 9.7 months of potential import cowl for Nigeria in 2026, whereas noting that the 2 measures won’t be calculated on equivalent bases.
He argued that Nigeria ought to as a substitute set up a clear fiscal financial savings framework via which genuinely out there oil revenues and different windfalls may very well be saved earlier than changing into a part of the central financial institution’s financial reserve property.
Such a framework, he mentioned, ought to have clear deposit and withdrawal guidelines, legislative oversight {and professional} funding administration.
Our acknowledged that the CBN ought to preserve reserves at ranges applicable for the nation’s financial circumstances and financial stability, in step with its statutory obligations.
Oye additionally cautioned in opposition to utilizing overseas reserves to retire home or exterior obligations with out first assessing the results for the nation’s capability to resist future shocks.
While acknowledging that retiring costly debt may very well be smart, he mentioned the choice must be based mostly on whether or not the ensuing financial savings outweighed the dangers of decreasing foreign-currency liquidity.
To enhance reserve administration, Oye proposed a collection of measures aimed toward making the nation’s exterior place extra clear, decreasing the price of sustaining reserves and strengthening the sources of foreign-exchange earnings.
First, he referred to as on the CBN to publish a quarterly reserve adequacy dashboard exhibiting gross reserves, liquid reserves, blocked or encumbered quantities, internet worldwide reserves, months of potential imports, short-term exterior debt protection and the IMF’s reserve adequacy metric.
The disclosures, he mentioned, must also embody the amount and maturity profile of overseas traders’ holdings of CBN open-market operation devices and different short-term home securities.
Second, Oye advocated a publicly defined reserve adequacy vary moderately than a inflexible goal. Such a benchmark, he mentioned, ought to replicate the nation’s import wants, debt maturities, exchange-rate regime, monetary market depth and publicity to exterior shocks.
Third, he urged the authorities to cut back dependence on costly, short-term overseas funding attracted by excessive yields, arguing that extra secure home financing may decrease the dangers related to sudden capital outflows.
He mentioned the target must be to handle the liabilities that make reserve accumulation pricey moderately than merely decreasing the reserve property themselves.
Fourth, Oye referred to as for a reputable exchange-rate framework that might enable the naira to regulate to market circumstances whereas the CBN intervened to include disorderly actions.
He argued that sustaining an artificially predetermined change charge may require the nation to carry bigger reserves to defend a place that may not be sustainable.
Finally, he advocated diversification of the reserve portfolio, citing the CBN’s Domestic Gold Purchase Programme for example of efforts to broaden the composition of exterior property.
Oye described the initiative as strategically necessary as a result of it linked reserve diversification to a traceable home mineral worth chain, though he acknowledged that gold carried its personal value and liquidity dangers.
He additionally referred to as for stronger formal channels for remittances, export proceeds and long-term funding, arguing that reserves constructed on sustainable foreign-exchange earnings can be extra resilient than these dependent on reversible portfolio inflows.
“Mr. Chike-Obi is right to puncture the superstition that a larger reserve headline automatically means a richer Nigeria. But the opposite superstition is equally dangerous. The reserve balance is not a lazy dollar pile, and the MPR is not a universal invoice for holding it,” he maintained.
He mentioned the precedence must be to find out the precise value of sustaining reserves, set up what dangers every greenback protects in opposition to and be sure that fiscal financial savings are usually not confused with the central financial institution’s financial obligations.
