Dynamic Regulator and Growth Stimulator?
The Central Bank of Nigeria - Part 1
The Central Bank of Nigeria’s “CBN” duty is to actively strive to maintain monetary stability, support the economic growth of Nigeria, and regulate the financial sector.
As a Dynamic Regulator, the CBN is expected to consistently adapt its monetary policies to address inflation, currency stability, and financial market integrity. Its regulations and oversight measures are to be aligned with both global practices and domestic economic conditions.
The CBN is also expected to act as a Growth Stimulator by leveraging monetary policy tools and interventions in various sectors such as agriculture, manufacturing, and SMEs, the CBN’s aim is to foster economic growth, job creation, and financial inclusion in Nigeria.
In our opinion, this theme encapsulates the dual role of the Central Bank of Nigeria in maintaining a stable financial environment and actively stimulating economic growth.
CBN’s 2022 Financial Report: Unpacking the Surprises
The release of the Central Bank of Nigeria's (CBN) financial statements for the past eight years has created a stir. From spirited local discussions to somber boardroom debates, the figures have been closely examined, leaving many uneasy yet relieved that it's not worse.
Curveballs and Concerns
Several surprises came with the report, such as the discrepancy between the actual size of the nation's foreign reserve reported at US$32.4 billion and CBN's website indicating US$37 billion. The overstatement by US$4.7 billion might have resulted from commitments to Goldman Sachs and JP Morgan, and foreign currency forward payable, effectively reducing the actual reserves to US$18 billion.
Questions arise about the decision-making in foreign loans and the lack of legislative assent or appropriate updates by the Debt Management Office (DMO).
CBN's Overdraft: A Leaky Faucet?
The report confirmed an alarming overdraft to the Federal Government of N23.18 trillion, exceeding the statutory limit.
The 76% increase in credit losses to N875 billion, and a 200% leap in staff loans from N13.7 billion in 2014 to N41 billion in 2022, add to the concerns.
Key Financial Highlights
Earnings and Profit
Net Interest Income: A remarkable increase of 74.86% from N1.04 trillion in 2021 to N1.83 trillion in 2022, thanks to the rise in interest income against expenses.
Profit Before Tax: Showed a promising growth of 39.21%, moving from N75.47 billion in 2021 to N105.1 billion in 2022.
Profit After Tax: Mirroring the positive trend in profit before tax, it surged by 38.24% from N75.13 billion in 2021 to N103.9 billion in 2022.
Operational Metrics
Total Operating Income: A healthy growth of 28.94% to N2.15 trillion in 2022, up from N1.67 trillion in 2021, despite a 50.17% decline in other operating income.
Total Operating Expenses: A moderate rise of 7.56% from N1.13 trillion in 2021 to N1.22 trillion in 2022, attributed to increases in currency issue expenses and personnel costs.
Reserves and Loans
External Reserves: A slight dip of 2.84% to N14.94 trillion in 2022, mainly due to declines in time deposits and money placements.
Credit Loss Expense: A significant leap of 75.66% from N498.2 billion in 2021 to N875.2 billion in 2022, primarily due to increased impairment in loans, receivables, and external reserves.
Staff Loans: An eye-catching increase of 120.3% from N18.46 billion in 2021 to N40.67 billion in 2022.
Other Key Figures
Total Equity: A strong growth of 30.78% to N1.60 trillion in 2022, up from N1.23 trillion in 2021.
Retained Earnings: Increased by 10.57% from N651.97 billion in 2021 to N720.9 billion in 2022, reflecting the rise in profit for the year.
Deposits Collected: A minor uptick of 7.66% to N24.29 trillion in 2022, from N22.56 trillion in 2021.
Currency Issue Expenses: A noticeable climb of 94.66% from N15.23 billion in 2021 to N29.65 billion in 2022.
In Summary
The CBN's 2022 results may have settled fears of insolvency but raised critical questions regarding the refusal to publish annual results, transparency, and adherence to legal standards. The figures provide both a fascinating insight and a warning about the complexity of the financial landscape.
The release has drawn attention to the underlying challenges and strategies of the Central Bank. As an investor, understanding these intricacies allows you to make informed decisions, and at Ranora, we continue to unravel these complexities for your benefit.