The Central Bank of Nigeria (CBN) has issued a directive to the international oil companies (IOCs), through the banks, restricting the repatriation of their export proceeds to 50 percent in the first instance.
In a letter to the banks, dated 14 February, 2024, signed by Director, Trade and Foreign Exchange Department, Dr Hassan Mahmud, the CBN expressed displeasure over the practice by the IOCs in repatriating 100 percent of their export proceeds to their home office.
“The Central Bank of Nigeria (CBN) has observed that proceeds of crude oil exports by International Oil Companies (IOCs) operating in Nigeria are transferred offshore to fund parent accounts of IOCs (otherwise referred to as ‘cash pooling’). This has an impact on liquidity in the domestic foreign exchange market,” the letter stated
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In line with the foreign exchange reforms of the CBN, the following measures have been prescribed for compliance with the IOCs.
Going forward, international oil companies may only remit half their export earnings to their parent companies, with the balance to be repatriated 90 days from the date of inflow of the export proceeds.
The CBN said that the above shall be subject to the fulfillment of the following documentation requirements, namely, “Prior approval of CBN for the repatriation of funds under the ‘Cash Pooling’ transaction”, and ‘Cash Pooling’ agreement with the parent entity of the IOCs operating in Nigeria,” among others.
“While the Central Bank of Nigeria strongly supports the need for international oil companies to have easy access to their export proceeds, particularly to meet their offshore obligations, this must be done with minimal negative impact on liquidity,” it said. “All banks are required to comply with this circular,” the CBN said
The requirement is the latest of several steps taken by the CBN since January to boost market liquidity, pricing and investor confidence, after the naira lost about 50% of its value last year.
While the measures have moderated volatility and increased foreign-exchange inflows into Nigeria, the currency has continued to depreciate.
