President Bola Tinubu’s Special Investigator, Jim Obazee, has raised concerns over the Central Bank of Nigeria’s (CBN) treatment of foreign exchange gains and losses in its 2025 financial statements, particularly the N13.712 trillion balance in its Derivative and Foreign Exchange Revaluation Account (DFERA).
Obazee described the treatment of foreign exchange-related items as one of the major areas requiring scrutiny in the CBN’s 2025 accounts, given the size of the DFERA balance and its potential implications for the bank’s reported financial position.
He made the observation in his address at the commissioning of the new headquarters of the Financial Reporting Council of Nigeria (FRC) in Lagos, where he urged the Council to undertake an urgent review of the CBN’s 2025 audited financial statements.
According to Obazee, the CBN’s accounting policy provides that realised foreign exchange gains and losses are recognised in the income statement, while certain unrealised foreign exchange gains and losses on monetary items are recognised through the statement of financial position and transferred to the DFERA.
He questioned the basis for the treatment and called for a detailed reconciliation showing the foreign exchange items recognised in profit or loss and those transferred to the DFERA.
“The magnitude of DFERA of N13.712 trillion makes this one of the highest risk accounting policy areas,” Obazee said.
He said the CBN should provide sufficient information to enable users of its financial statements to understand how foreign exchange movements had affected its reported income, assets, liabilities and reserves.
Obazee also drew attention to other foreign exchange-related figures contained in the 2025 financial statements, including an unrealised foreign exchange revaluation gain of about N1.071 trillion and a fair-value gain on gold bullion of approximately N1.795 trillion.
He questioned whether the disclosures surrounding the amounts were sufficient to enable users of the accounts to understand how the gains were calculated and recognised.
The former FRC boss said the issue was particularly important given the scale of the CBN’s balance sheet and the role of foreign exchange transactions and reserves in the country’s monetary and financial system.
His concerns formed part of a broader criticism of the accounting basis and disclosures adopted by the CBN in its 2025 financial statements.
Obazee noted that the CBN had applied its Financial Reporting Manual from January 1, 2025, while the 2024 financial statements had been prepared under IFRS Accounting Standards and the FRC guideline.
He questioned the decision to retain comparative figures despite the CBN’s disclosure that the 2025 and 2024 figures were not comparable.
According to him, the change in accounting basis raised questions about the quantitative opening adjustments and the effect of the new treatment on the CBN’s reported profit and equity.
He also questioned the CBN’s treatment of liquidity management costs, which its accounting policy allows to be deferred and amortised over a period of up to four years.
Obazee said the policy raised questions about the timing of expense recognition and the possibility of earnings management.
He called for the FRC to determine the economic substance of the deferred costs, how much was capitalised in 2025, who approved the deferrals and what the CBN’s reported profit would have been if the expenditure had been recognised immediately.
He further drew attention to an approximately N8.345 trillion amount described in the accounts as “deferred interest and cost”, questioning its relationship with the CBN’s accounting treatment of deferred liquidity management expenditure and the approximately N5.275 trillion CBN instrument interest expense disclosed elsewhere in the financial statements.
Obazee also questioned an approximately N2.977 trillion overdraft facility extended by the CBN to the Federal Government in 2025.
He said the financial statements indicated that the applicable interest income on the facility was nil and argued that the treatment required further examination in relation to Section 38 of the Central Bank of Nigeria Act, 2007.
The former FRC chief subsequently called on the Council to obtain both the summary and full audited financial statements of the CBN and review the accounts.
“Ask them to bring you the summary and the full account because they urgently need to withdraw that financial statement and re-issue it,” he told the FRC Executive Secretary, Rabiu Olowo.
Obazee said the issues he had identified were extensive and that he would discuss them further with the FRC management.
He also questioned why the CBN had released only summary financial statements instead of making the full audited accounts and auditors’ report available to Nigerians.
According to him, the full auditors’ report contained important information, including Key Audit Matters, which were not contained in the summary published by the apex bank.
Obazee said the FRC should review the CBN’s financial statements and, if the concerns were established, ensure that the accounts were withdrawn and restated.
He also urged the Council to intensify its inspection and investigation functions to improve the quality and credibility of financial reporting by major public institutions.
Obazee’s intervention came alongside his call for the FRC to obtain and review the financial statements of the Nigerian National Petroleum Company Limited (NNPCL) over the controversial N210 trillion figure that has generated concerns at the National Assembly.
He urged the Council to request the relevant documents if they had not already been submitted, saying the review should provide Nigerians with clarity on the controversy.
The development places the CBN’s treatment of foreign exchange gains and losses, particularly the N13.712 trillion DFERA balance, among the key accounting issues Obazee wants the FRC to examine in the apex bank’s 2025 financial statements.
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