Former Fidelity Bank chairman and former Managing Director of the Asset Management Corporation of Nigeria (AMCON), Mustafa Chike-Obi, has warned that Nigeria’s rising foreign reserves do not automatically translate into improved economic welfare, estimating that the cost of holding the reserves could exceed $10 billion annually. His comments come as the Nigeria Revenue Service (NRS) reported ₦3.70 trillion in revenue collections for August 2026, with petroleum royalties contributing a significant share of the total.
Key Highlights
- Mustafa Chike-Obi estimates that the cost of holding Nigeria’s foreign reserves could exceed $10 billion annually.
- Nigeria’s foreign reserves stood at $55.09 billion as of October 14, 2026, according to the reported Central Bank of Nigeria (CBN) data.
- The former AMCON managing director argues that reserve levels should reflect the country’s foreign-currency obligations rather than increase for their own sake.
- The Nigeria Revenue Service collected ₦3.70 trillion in August 2026.
- Petroleum royalties contributed ₦993.02 billion, while customs collections fell below their monthly budget target.
- Economic analysts have called for a more comprehensive assessment of the costs and benefits of maintaining large foreign reserves.
Chike-Obi Questions Cost of Holding Nigeria’s Foreign Reserves
Speaking on the Policy Without Politics podcast, which he co-hosts with Ken Ikpe, Chike-Obi argued that Nigeria’s foreign reserves should be assessed based on their economic benefits, accessibility and cost of accumulation.
According to him, reserves of about $52 billion to $53 billion earn approximately three per cent annually on liquid assets held abroad, while the naira funding used to accumulate the reserves carries an estimated cost of around 20 per cent.
He explained that the difference between the two rates creates an estimated annual opportunity cost of approximately 17 percentage points, assuming the naira’s nominal value remains unchanged.
Chike-Obi estimated that applying this differential to the country’s reserve holdings could result in an annual cost exceeding $10 billion.
He stressed that foreign reserves must be held in highly liquid assets that can be accessed quickly to meet international obligations. Such assets may include deposits and short-term instruments held through foreign financial institutions.
He noted that longer-term investments, such as a 10-year South African bond, would not qualify as conventional foreign reserves because they may not be readily available when immediate foreign-currency payments are required.
Why Nigeria Needs Foreign Reserves
Chike-Obi identified two major reasons countries maintain foreign reserves: meeting foreign-currency obligations as they fall due and reassuring international lenders and trading partners that they can finance imports and fulfil external payment commitments.
He argued that Nigeria should determine the appropriate level of reserves by assessing its expected foreign-currency obligations and maintaining sufficient liquid assets to meet them.
According to him, the objective should not be to accumulate reserves indefinitely but to ensure that the country has enough foreign currency to withstand economic shocks and meet its international commitments.
He acknowledged that economies heavily dependent on imports generally require larger reserve buffers. However, he maintained that Nigeria’s current holdings may exceed what is strictly necessary for its obligations.
Reported CBN data put Nigeria’s foreign reserves at $55.09 billion as of October 14, 2026, compared with $51.94 billion on July 28, 2026.
The increase has strengthened the headline reserve position, but Chike-Obi’s argument raises questions about the cost of accumulating and maintaining those assets, as well as the extent to which the benefits outweigh the financial burden.
Dele Oye Challenges the $10bn Loss Estimate
Chike-Obi’s assessment has attracted criticism from Dele Oye, Chairman of the Alliance for Economic Research and Ethics.
Oye acknowledged that the difference between the returns earned on foreign reserves and the cost of funding them raises an important economic question. However, he argued that presenting the differential as a straightforward annual loss of $10 billion oversimplifies the issue.
He called for a more detailed and transparent assessment of Nigeria’s reserve requirements, including the level of protection needed against external shocks and the marginal cost of maintaining additional reserves.
Oye maintained that policymakers should neither celebrate rising reserves without examining their costs nor dismiss them as an unnecessary expense.
The debate highlights the need to balance the financial cost of holding reserves against their role in protecting the economy from external shocks, supporting international payments and strengthening confidence in the country’s ability to meet its obligations.
NRS Collects ₦3.70 Trillion in August 2026
Separately, data presented at the technical session of the September Federation Account Allocation Committee (FAAC) meeting showed that the Nigeria Revenue Service collected ₦3.70 trillion in August 2026.
Petroleum royalties accounted for ₦993.02 billion, representing approximately 26.8 per cent of the total collections. The amount exceeded the monthly budget target of ₦675 billion by ₦318.02 billion.
The figures indicate that petroleum-related revenue remained a major contributor to government income during the period.
Other revenue categories recorded mixed performances.
Petroleum and Upstream Tax Collections
Petroleum profit tax, hydrocarbon tax and upstream company income tax generated ₦758.82 billion, exceeding the budget target of ₦608.75 billion by ₦150.07 billion.
The performance reflects the continued importance of the oil and gas industry to Nigeria’s public finances.
Company Income Tax, Capital Gains Tax and Stamp Duty
Collections from company income tax, capital gains tax and stamp duty reached ₦1.04 trillion, slightly below the monthly target of ₦1.07 trillion.
The shortfall indicates that performance across non-oil revenue categories was not uniform.
VAT Collections Exceed Target
Value Added Tax (VAT) collections stood at ₦834.84 billion, surpassing the target of ₦829.92 billion by approximately ₦4.93 billion.
The performance provides evidence of relatively steady VAT receipts, although the broader sustainability of tax revenue will depend on economic activity, compliance and the performance of different sectors.
Other Revenue Sources Record Mixed Results
Gas-flaring penalties, fees, rentals and miscellaneous oil revenue generated ₦66.76 billion, significantly exceeding the budget target of ₦31.10 billion.
Solid minerals royalties and related receipts also surpassed their targets, although the overall amounts remained relatively modest.
However, Nigeria Customs Service collections stood at ₦317.75 billion, falling ₦144.13 billion short of the monthly budget target.
The figures point to uneven revenue performance, with strong petroleum-related collections offsetting shortfalls in customs revenue and some other categories.
Read also:
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- FG, States, LGs Share N2.428tn FAAC Allocation For September
- Tinubu Says World Bank Report Confirms Reforms Are Working as Nigerians Question Economic Gains
Nigeria’s Revenue Profile Remains Oil-Dependent
The August revenue figures underline the continued dependence of Nigeria’s public finances on the petroleum sector.
Strong petroleum royalties and upstream taxes contributed significantly to total collections, while VAT provided a relatively stable source of non-oil revenue. Nevertheless, the customs shortfall and weaker performance in some other categories highlight the need to strengthen revenue diversification.
For policymakers, the challenge is not simply to increase revenue collections but to ensure that public income is sustainable, efficiently managed and translated into better living conditions for Nigerians.
Conclusion
Chike-Obi’s warning about the cost of maintaining large foreign reserves, alongside the NRS’s ₦3.70 trillion revenue performance in August 2026, raises broader questions about the quality and sustainability of Nigeria’s economic gains.
Although rising reserves can strengthen confidence in a country’s ability to meet international obligations, their costs and adequacy must be assessed alongside the risks they are designed to protect against.
Similarly, strong monthly revenue collections do not automatically indicate improved economic welfare, particularly when a significant share depends on oil and gas receipts.
Ultimately, Nigeria’s economic progress will depend not only on the size of its foreign reserves or government revenue but also on sound fiscal management, sustainable revenue generation and the effective use of public resources.
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