…Monetary Tightening Raises Liquidity Management Expenses To N4.5tn
Between January and December 2024, the Central Bank of Nigeria recorded a reduction of about N4.2tn in loans and receivables from N16.1trn to N11.9trn.
This N4.2tn is contained in the apex bank financial statement for the 2024 period.
The N4.2tn reduction in loans and receivables is primarily attributed to significant recoveries from earlier intervention lending programs, a deliberate policy shift away from intervention lending and monetary financing through ways and means.
This, the apex bank stated, is in line with it’s new stance on allowing market mechanisms to drive credit allocation and financial sector development.
Despite the loan recovery, the apex bank experienced a notable uptick in its expenses in 2024 as the liquidity management operations costs rose to N4.5trn from N1.5trn in 2023.
This increase was in tandem with the tightening monetary policy stance adopted to combat inflationary pressures throughout the year.
In pursuit of its monetary tightening policy, the CBN conducted more frequent and higher-value Open Market Operations (OMO) to mop up excess liquidity arising from fiscal injections at a significant cost.
This is a responsibility that the CBN has been carrying out on behalf of the federation, but in some jurisdictions, this cost is borne by the government.
The financial statements also reflect an increase in the loss on settled derivative contracts during the year from ₦6.3tn in 2023 to ₦13.9tn in 2024.
This development, according to the CBN Report is a direct consequence of the high volume of derivative contracts settled by the Bank in 2024.
These are legacy transactions that the current management met on the resumption of their office.
The proactive settlement effort was undertaken as part of CBN management’s broader strategy to reduce outstanding foreign exchange liabilities, thus lowering its FX exposure, boost net foreign reserves, thereby improving Nigeria’s external buffer and investor confidence, restore credibility to Nigeria’s forward markets and address legacy obligations transparently.
In the area of external reserves, the CBN Report stated that there was an increase from $36.6bn in 2023 to $38.8bn in 2024. This, it noted, is largely attributable to improvement in accretion to external reserves from portfolio investors, diaspora remittances and Federal Government receipts following improvement in the confidence in the economy.
The performance reflects the CBN’s firm commitment to external sector stability, ensuring Nigeria is better positioned to meet its international obligations, stabilize the Naira, and boost macroeconomic confidence.
There was also an improvement in the deficit position of ₦1.3tn in 2023 to a surplus of ₦165bn in 2024. The turnaround is a direct consequence of effective containment of expenditure, gains on investments made by the Bank and increased income from foreign exchange transactions.
Operating expenses in 2024 were well-managed and optimized, reflecting a cost-conscious culture. This was achieved through strategic cost rationalization initiatives, including reduction in non-essential spending and streamlined operations across regional branches and departments.
The apex bank added that the improved performance of in 2024 is not coincidental but a product of deliberate, and strategic management efforts.
It added that the bank’s leadership has reinforced governance and accountability, instilling operational discipline, pursued a balanced monetary policy stance, ensuring price and financial system stability.
These reforms, it noted, have collectively repositioned the CBN as a credible monetary authority, with its 2024 financial results serving as proof of its unwavering resolve to support economic recovery, safeguard financial stability, and build public trust.
