Claims that Nigeria loses more than $10 billion yearly by holding foreign reserves are built on shaky arithmetic, according to Dele Oye, chairman of the Alliance for Economic Research and Ethics (AERE), who says the country needs a transparent, country-specific answer to how much its buffers actually cost.
Oye made the argument in a policy essay dated October 18, 2026, responding to comments by Mustafa Chike-Obi, former Fidelity Bank chairman and former Managing Director of the Asset Management Corporation of Nigeria (AMCON) .
Chike-Obi had argued that reserves earned about 3% annually while the cost of naira funds used to support them was around 20%. That gap, he said, created a potential 17-percentage-point annual loss if the exchange rate stayed unchanged .
Oye, a lawyer and former President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), said the calculation carries an important economic point but cannot stand as an accurate loss figure without more evidence.
Why the Interest-Rate Gap Doesn't Add Up
The flaw, Oye explained, is that the naira rate and the dollar return reflect different currencies, risks and financing arrangements.
A proper comparison would have to account for exchange-rate movements, hedging costs, instrument maturities and the actual yields on the liabilities used to finance or sterilise reserves.
“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 said .
Oye argued that reserves are not ordinary savings to be judged by interest earned.
They are protection against shocks that could destabilise the economy, including falling oil receipts, retreating foreign investment and external borrowing constraints.
“An insurance policy appears wasteful in calm weather because the storm has not yet arrived,” he said.
“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.”
Gross Reserves Are Not Free Cash
Oye acknowledged that Nigeria’s reserve position has improved. However, he warned that the headline figure must be read alongside what is readily available, existing foreign obligations and exposure to shocks.
He noted that reserves include separate portions attributable to the Central Bank of Nigeria (CBN), the federal government and the federation.
The balance must also be examined alongside liquid assets, encumbered funds and net international reserves .
“A large gross balance can therefore be a sign of improved resilience without being freely spendable national cash,” he said.
Oye also cautioned against proposals to automatically move reserves above a set threshold into a development fund or routine debt repayment. Such a move, he said, would blur the line between monetary reserves and fiscal savings.
“The federal budget needs revenue, borrowing authority and fiscal institutions. The CBN needs a reserve buffer and a balance sheet fit for monetary stability. These are related national accounts, but they are not the same wallet,” he said.
A Five-Point Plan for Better Reserve Management
Oye proposed five reforms to make Nigeria’s external position more transparent and less costly.
First, he called on the CBN to publish a quarterly reserve adequacy dashboard.
It should show gross reserves, liquid reserves, blocked amounts, net international reserves, months of prospective imports, short-term external debt coverage and the IMF’s reserve adequacy metric.
Second, he advocated a publicly explained reserve adequacy range rather than a rigid target, reflecting import needs, debt maturities, the exchange-rate regime and exposure to shocks.
Third, he asked authorities to reduce dependence on expensive, short-term foreign investment attracted by high yields, since more stable domestic financing would lower the risk of sudden outflows.
Fourth, he called for a credible exchange-rate framework that lets the naira adjust to market conditions while the CBN intervenes only to contain disorderly moves.
Finally, he backed diversification of the reserve portfolio, citing the CBN’s Domestic Gold Purchase Programme as strategically important, though he acknowledged gold carries its own price and liquidity risks.
He also called for stronger formal channels for remittances, export proceeds and long-term investment.
Reserves built on sustainable foreign-exchange earnings, he said, would be more resilient than those dependent on reversible portfolio inflows.
Oye contrasted the statutory import-cover condition with the International Monetary Fund’s (IMF) projection of about 9.7 months of prospective import cover for Nigeria in 2026, while noting the two measures may not use identical bases.
“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 said.
