••Central Bank’s Strategic Shift Yields Loan Recoveries Amid Soaring Liquidity Management Expenses
By OBSERVERS TIMES.
The Central Bank of Nigeria (CBN) announced a remarkable N4.2 trillion reduction in loans and receivables over the course of 2024, decreasing from N16.1 trillion to N11.9 trillion. This substantial recovery, outlined in the CBN’s financial statement, is largely attributed to successful recoveries from previous intervention lending programs and a strategic pivot away from monetary financing.
Despite this recovery, the CBN faced a dramatic rise in liquidity management costs, which soared to N4.5 trillion from just N1.5 trillion in 2023. This increase aligns with the bank’s tightening monetary policy aimed at combating inflationary pressures throughout the year. The CBN’s proactive measures included more frequent and higher-value Open Market Operations (OMO) to absorb excess liquidity resulting from fiscal injections, a responsibility typically borne by the government in other jurisdictions.
The financial statements also highlighted a staggering increase in losses from settled derivative contracts, rising from N6.3 trillion in 2023 to N13.9 trillion in 2024. This surge is attributed to the bank’s efforts to address legacy transactions inherited by the current management, aimed at reducing foreign exchange liabilities and enhancing Nigeria’s external reserves.
The CBN reported a rise in external reserves from $36.6 billion in 2023 to $38.8 billion in 2024, fueled by increased inflows from portfolio investors, diaspora remittances, and improved government receipts, reflecting renewed confidence in the economy.
Moreover, the bank’s financial position improved significantly, transitioning from a deficit of N1.3 trillion in 2023 to a surplus of N165 billion in 2024, thanks to effective expenditure containment and gains from foreign exchange transactions.
The CBN’s 2024 performance underscores its commitment to economic recovery and financial stability, achieved through strategic management, operational discipline, and a balanced monetary policy approach. These efforts have strengthened the CBN’s role as a credible monetary authority, reinforcing public trust and confidence in Nigeria’s financial system.
