In a move aimed at stabilising the naira, the Central Bank of Nigeria (CBN) during the week announced a new policy restricting international oil companies (IOCs) from repatriating 100 percent of their foreign exchange proceeds abroad immediately.
This decision comes amidst ongoing pressure on the naira, which has seen its value fluctuate against major currencies in recent weeks.
The policy, which takes effect immediately, limits IOCs to repatriate only 50 percent of their proceeds immediately while the other 50 percent will be repatriated 90 days from the day of inflow.
According to the circular signed by Hassan Mahmud, the apex bank’s director of trade and exchange, the CBN strongly supports the need for IOCs to have easy access to their export proceeds particularly to meet their offshore obligations; however, this must be done with minimal negative impact on liquidity in the Nigerian foreign exchange market.
“The central bank has observed that proceeds of crude oil exports by international oil companies (IOCs) operating in Nigeria are transferred offshore to fund parent accounts of the IOCs (otherwise referred to as cash polling). This has an impact on liquidity in the domestic foreign exchange market,” the circular dated February 14, 2024 said.
It added: “In line with the ongoing reforms in the foreign exchange market, it has become necessary to take measures to address this trend.
Consequently, the CBN hereby directs as follows; “Banks are allowed to pool cash on behalf of IOCS, subject to a maximum of 50% of the repatriated export proceeds in the first instance. The Balance 50% may be repatriated after 90 days from the date of inflow of export proceeds.”
Te apex bank also introduced rules that will guide “cash polling” by IOCs going forward.
They include approval from the CBN before repatriation of funds under the cash polling framework, and the parent entity of IOCs will have to reach an agreement with the CBN before “cash polling.”
The CBN also required IOCs to submit statements of expenditure incurred in the period before the cash polling.
Other requirements include “evidence of the source of foreign exchange inflow and completion of relevant forex form(s) as required under extant regulations.”
The new policy has drawn mixed reactions from stakeholders. While some industry experts commend the CBN’s efforts to manage the foreign exchange market, others express concerns about the potential impact on investor confidence and the overall business environment in the oil and gas sector.
