CBN Permits IOCs to Sell 50% of Repatriated Export Proceeds to Authorised FX Dealers

The Central Bank of Nigeria, on Saturday, issued further clarification on the 50 per cent balance of the repatriated export proceeds, saying that the balance of the proceeds may be sold to authorised dealers or eligible users of Foreign Exchange (FX) with eligible transactions.

CBN disclosed this in a circular dated May 31, 2024, and posted on its website on Saturday.

The circular was signed by Dr. W.J. Kanya for the CBN Director, Trade and Exchange Department, and addressed to all authorised dealers.

In the circular, the apex bank also clarified that the 50 per cent balance may be sold wholly “if the IOC does not have any financial obligation to settle with the funds during or after the 90 days retention period.”

Earlier last month, the CBN had stated that a 50 per cent balance of the repatriated export proceeds could be used to settle financial obligations in the country, whenever required, during the prescribed 90-day period.

The apex bank also emphasised that the initial 50 per cent of the repatriated proceeds could be pooled immediately or as when required.

The circulars followed recent inquiries by banks and other stakeholders on its circular in respect of Cash Pooling requests by banks on behalf of IOCs.

The central bank stated that banks may submit the request for cash pooling ahead of the expected date of receipt, supported by the required documents, for approval by the central bank.

Accordingly, the CBN explained that expenses on petroleum profit tax, royalty, domestic contractor invoices, cash calls, and domestic loan -principal and interest payment, are eligible for settlement from the balance 50 per cent.

Others include transaction taxes, (including Nigerian Content Development (NCD) Levy), education tax, and forex sales at the Nigerian Foreign Exchange Market.

Earlier in February, the CBN had introduced a cocktail of policy interventions to further boost FX liquidity in the system, declaring that going forward, International Oil Companies (IOCs) would only be allowed to repatriate a maximum of 50 per cent of export proceeds in the first instance.

The central bank added that the balance of 50 per cent of export proceeds may be repatriated after 90 days from the date of inflow of the proceeds.

Also, the apex bank prohibited the payment of Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) by cash.

The apex bank declared that PTAs and BTAs must be disbursed through electronic channels only, including debit or credit cards to curb abuses and boost transparency in FX transactions.

However, the apex bank pointed out that the policy intervention on IOCs was in line with ongoing reforms in the foreign exchange market, noting that proceeds of crude oil exports by the IOCs operating in the country are often transferred offshore to fund their respective parent accounts, otherwise referred to as “cash pooling”.

The CBN said this practice has an impact on liquidity in the domestic foreign exchange market.

The central bank pointed out that while it strongly supports the need for IOCs to have easy access to their export proceeds, particularly to meet their offshore obligations, such repatriations must be done with minimal negative impact on liquidity in the Nigerian foreign exchange market.

Ndubuisi Francis, James Emejo and Sunday Aborisade

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