Insists international reserves not peculiar financial savings, however safety in opposition to disruptions
Admits Nigeria wants extra rigorous evaluation of price 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 international 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 price and needs to be subjected to rigorous financial scrutiny, subtracting an estimated 3 per cent return on international belongings from an assumed 20 per cent naira funding price doesn’t set up the Central Bank of Nigeria (CBN) precise price 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 financial 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 essential query concerning the financial implications of accumulating international reserves, however argued that the conclusion drawn from the interest-rate differential was not supported by ample proof.
More basically, Oye argued that the calculation in contrast the return on dollar-denominated belongings with an assumed naira funding price with out establishing how the reserves had 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 international reserves earned about 3 per cent yearly whereas the price of naira funds used to help them was round 20 per cent, creating a possible 17-percentage-point annual loss if the alternate charge remained unchanged.
But Oye mentioned the argument contained an essential 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 belongings 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 needs to be measured in opposition to the safety the belongings present when oil receipts decline, international funding retreats, exterior borrowing turns into troublesome or stress mounts on the naira.
He argued that international reserves weren’t peculiar 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 financial 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, present international 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 steadiness 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 steadiness additionally wanted to be examined alongside liquid belongings, 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 stress.
The AERE chairman warned in opposition to proposals that might routinely switch reserves above a predetermined threshold right into a fund for home growth initiatives or routine debt compensation.
He argued that such an association might blur the excellence between financial reserves and monetary financial savings, doubtlessly 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 an alternative 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 belongings.
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 acceptable for the nation’s financial circumstances and financial stability, per its statutory duties.
Oye additionally cautioned in opposition to utilizing international 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 needs to be primarily based 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 geared 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, also needs to embody the quantity and maturity profile of international buyers’ holdings of CBN open-market operation devices and different short-term home securities.
Second, Oye advocated a publicly defined reserve adequacy vary reasonably than a inflexible goal. Such a benchmark, he mentioned, ought to mirror the nation’s import wants, debt maturities, exchange-rate regime, monetary market depth and publicity to exterior shocks.
Third, he urged the authorities to scale back dependence on costly, short-term international funding attracted by excessive yields, arguing that extra steady home financing might decrease the dangers related to sudden capital outflows.
He mentioned the target needs to be to deal with the liabilities that make reserve accumulation expensive reasonably than merely decreasing the reserve belongings 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 alternate charge might 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 belongings.
Oye described the initiative as strategically essential 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 needs to be to find out the precise price of sustaining reserves, set up what dangers every greenback protects in opposition to and be certain that fiscal financial savings aren’t confused with the central financial institution’s financial duties.
