The Central Bank of Nigeria (CBN) has issued further details on the circular pertaining to the cash pooling of repatriated oil and gas export proceeds by international oil companies (IOCs).
In response to observations raised by banks and other stakeholders following the February circular, the apex bank outlined specific expenses that can be covered from 50 percent of the repatriated funds. These expenses include petroleum tax, royalty, domestic contractor invoices, cash calls, domestic loan payments, interest payments, education tax, transaction tax, and forex sales in the Nigerian foreign exchange market.
The CBN had disclosed that the IOCs were transfering crude oil export proceeds offshore for cash pooling, a practice it said had a direct impact on the domestic foreign exchange market liquidity.
To mitigate the negative effects and as part of ongoing forex market reforms, the CBN introduced specific measures. The new guidelines allows banks to pool cash for IOCs. The IOCs are allowed to pool the first 50 percent of the repatriated proceeds to Nigeria.
The clarification was communicated via a circular bearing reference number TED/FEM/PUB/FPC/001/004, available on the bank’s website and signed by Dr. Hassan Mahmud, Director of the Trade and Exchange Department, on Tuesday.
“The initial 50 per cent of the repatriated proceeds can be pooled immediately or as when required. Banks may submit the request for cash pooling ahead of the expected date of receipt, supported by the required documentation, for approval by the Central Bank of Nigeria,” the bank said on Tuesday.
The latest notification from CBN outlined procedures for cash pooling requests, stating that the initial 50 percent of repatriated proceeds can be pooled immediately or as needed. Banks are permitted to submit pooling requests in advance of expected receipt dates, supported by necessary documentation, for approval by the Central Bank of Nigeria.
The bank said the remaining 50 per cent balance of repatriated export proceeds can be utilised to settle financial obligations in Nigeria within the prescribed 90-day period. Eligible expenses for settlement from this balance include petroleum tax, royalty, domestic contractor invoices, cash calls, domestic loan payments, interest payments, education tax, transaction tax, and forex sales in the Nigerian foreign exchange market.
“The 50 per cent balance of the repatriated export proceeds could be used to settle financial obligations in Nigeria, whenever required, during the prescribed 90-day period.
“The under-listed expenses are eligible for settlement from the balance 50 per cent Petroleum tax, Royalty, Domestic contractor invoice, cash call, domestic loan payment, interest payment, education tax, transaction tax, and forex sales at Nigeria foreign exchange market,” the circular also said.
The more explicit clarification that was given by the CBN on Tuesday showed that banks have the green light to forward cash pooling requests before the actual date of receipt, which must be backed by the necessary documentation for CBN’s approval. The remaining 50 per cent of the repatriated export proceeds can be allocated to meet financial obligations within Nigeria, as and when required, within the stipulated 90-day period.
