By Dr Suleyman A Ndanusa PhD OON
*Photo: Mr Olayemi Cardoso, Governor of the Central Bank of Nigeria*
There is an interesting conversation unfolding around Nigeria’s Net Foreign Exchange Reserves. Predictably, opinions have become divided. Some see the announcement as vindication of the Central Bank’s reform programme; others question the figures and the methodology behind them.
That, in my view, misses the larger story.
The issue before us is not simply whether Nigeria’s reserves have improved. There is little doubt that they have. The more important question is whether we can use this moment to further strengthen the credibility of one of our most important economic institutions.
Having known Governor Olayemi Cardoso professionally over the years, I have come to appreciate his emphasis on professionalism, transparency and analytical rigour. It is against that background that I view the current debate.
The reforms undertaken by the Central Bank over the past two years have not been easy. Restoring greater order to the foreign exchange market, addressing longstanding distortions, rebuilding confidence and strengthening Nigeria’s external position have required difficult decisions and policy consistency. Whatever one’s views on the broader reform agenda, these efforts represent important institutional work and deserve fair recognition.
The discussion around Net Foreign Exchange Reserves should therefore begin from that premise.
What is perhaps less widely appreciated is that the concept of net reserves is not a Nigerian innovation. Nor is it an accounting device devised by the Central Bank. It derives from internationally accepted reserve management principles developed over many years by the International Monetary Fund and other multilateral institutions. The objective is straightforward, that is to distinguish between gross reserve assets and those that are genuinely available after accounting for short term foreign currency obligations and other encumbrances.
In other words, the emphasis is no longer on how large the reserves appear, but on how much of those reserves is actually available when needed. That is a more meaningful measure of resilience, and it reflects the direction in which modern central banking has evolved.
Indeed, this has been one of the recurring themes in the IMF’s engagement with Nigeria. In its recent assessments, the Fund has acknowledged the significant progress made in restoring macroeconomic stability and strengthening the country’s external position. At the same time, it has encouraged greater clarity regarding the composition of reserve assets and the extent to which reported reserves align with internationally accepted definitions of usable reserves. Those observations should not be read as criticism. They are part of the discipline of modern reserve management and are intended to strengthen confidence rather than diminish it.
Seen in that light, the current debate assumes a different character.
The question is no longer whether the Central Bank should report net reserves. It should. That is entirely consistent with international best practice.
The more pertinent question is whether the next phase of the reform should involve publishing a fuller explanation of the methodology underpinning those figures. What liabilities were netted off? How were they valued? To what extent does the methodology correspond with the IMF’s reserve liquidity framework? Can the underlying data be presented in sufficient detail to permit independent verification?
These are not hostile questions. They are the very questions that investors, economists, rating agencies and multilateral institutions routinely ask of every serious central bank.
Nor should such questions be viewed as a challenge to the reform programme itself. Quite the contrary. If the reforms have indeed strengthened Nigeria’s external buffers as available evidence suggests they have, then greater disclosure can only reinforce that achievement. Transparency does not compete with credibility; it creates it.
This is why I believe the present moment offers an important opportunity. The Central Bank has embarked upon a journey of institutional reform. It has worked to improve policy coherence, market confidence and the quality of Nigeria’s external position. The logical next step is to ensure that the reporting framework attracts the same level of confidence as the reforms themselves.
That would not simply settle today’s debate. It would establish a higher benchmark for transparency in monetary management and strengthen the confidence of markets, development partners and the Nigerian public alike.
In the final analysis, the true value of any reserve figure lies not merely in the headline it generates but in the confidence it inspires. Numbers matter. Methodology matters just as much. And institutions earn their strongest reputations when both stand up to careful scrutiny.
That, perhaps, is the real story behind Nigeria’s Net Foreign Exchange Reserves and it is a story whose next chapter can be every bit as compelling as the first.
*Suleyman A. Ndanusa, PhD, OON, is an economist, lawyer, strategic studies scholar, and public policy thinker and practitioner with extensive experience in financial markets, regulation, governance, national Security and development.”