The Central Bank of Nigeria (CBN) continues to have billions of dollars’ worth of swap positions on its books with counterparties largely Nigerian banks, and government owned institutions such as the NSIA and Bank of Industry (BOI).
The BOI in its audited 2023 financial statements disclosed N2.08 trillion foreign currency (Euro) swap exposure to the Central Bank of Nigeria (CBN).
According to the BOI, it entered into various foreign currency swap contracts of Euros and US dollars’ nominal amount with the CBN during the period.
The Group estimates the fair value of the derivatives transacted with the CBN using the discounted cashflow technique with the observable yield curves.
An FX swap is a financial transaction in which two counterparties exchange specific amounts of two different currencies at the outset and repay at a future date according to a predetermined rule reflecting both interest payments and amortization of the principal.
Currency swaps with the CBN avails USD liquidity to the apex bank while providing an avenue to boost earnings for the BOI.
The Bank of Industry (BOI) reported profit before tax (PBT) of N153.81 billion for 2023, a 117.69% increase from the previous year’s N70. 7 billion.
The bank however also reported foreign exchange loss of N1.3 trillion related to exposure to FX which stood at a net liability of EUR2.1 billion as at 31 December 2023.
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