The Central Bank of Nigeria (CBN) has barred the International Oil Companies (IOCs) from repatriating 100 per cent of their foreign exchange earnings to their parent companies at once.
With the restriction, the IOCs can only pull out 50 per cent of the proceeds from their banks in the first instance and then the other half after 90 days.
According to the directive, their bankers will first “obtain prior approval from the CBN for repatriation and satisfy specific documentation requirements,” such as completion of relevant Forex forms, evidence of the source of foreign exchange inflows, and provide statements of expenditure by the IOCs in the immediate past period related to the “cash pooling” transaction.
The CBN also directed that payments of Personal and Basic Travel Allowances by banks should only be done via electronic channels and no longer by cash.
The measures, according to the apex bank’s Director of Trade and Exchange Department, Hassan Mahmud, are aimed at shoring up dollar liquidity in the Nigerian FX markets.
In one of the three circulars issued by Mahmud on measures to make the foreign exchange market liquid, the CBN said it observed that proceeds of crude oil exports by the IOCs were transferred offshore to fund their parent accounts in a phenomenon described as “cash pooling.”
“This has an impact on liquidity in the domestic foreign exchange market,” the apex bank stated.
“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 per cent of the repatriated export proceeds in the first instance;
*The balance may be repatriated after 90 days from the date of inflow of export proceeds.”
