The Central Bank of Nigeria (CBN) has made a significant announcement concerning the repatriation of foreign exchange earnings by International Oil Companies (IOCs) operating in the country. barring them from repatriating 100 per cent of their foreign exchange proceeds at once.
Effective immediately, the new policy by the bank, in addition to its barrage of moves to boost foreign exchange liquidity, has been put in place to restrict IOCs from fully repatriating 100 per cent of their foreign exchange earnings. Instead, they are now permitted to repatriate only 50 per cent of their proceeds immediately, while the remaining 50 per cent can be repatriated 90 days from the date of inflow.
In a circular issued and signed by the director, Trade and Exchange department of the CBN, Dr Hassan Mahmud, the apex bank said only 50 per cent of forex proceeds can be repatriated at once. The CBN noted that the practice which is known as “cash pooling” has an impact on liquidity in the domestic forex market.
In a related development, the CBN also stopped the cash payment of forex for Personal and Business Travel Allowances (PTA/BTA) to applicants.
In the circular that was addressed to authorised dealer banks, the central bank on Thursday said payments will now be made through electronic transfer.
In a circular also signed the director of trade and exchange at the apex bank, Hassan Mahmud, said the new directive was “In line with the Bank’s commitment to ensure transparency and stability in the foreign exchange market and avoid foreign exchange malpractices, All Authorised Dealer Banks shall henceforth effect payout of PTA/BTA through electronic channels only, including debit or credit cards. For the avoidance of doubt, payment of PTA/BTA by cash is no longer permitted.”
“Authorised Dealers and the general public are hereby to note and comply accordingly,” Mahmud said in the circular titled “Allowable Channels for Payment of Personal Travel Allowance and Business Travel Allowance”.
Meanwhile, the circular on IOCs forex earnings repatriation emphasised the importance of ensuring that IOCs have access to their export proceeds to fulfil offshore obligations. However, the policy aims to achieve this while minimising any negative impact on liquidity in Nigeria’s foreign exchange market.
The circular issued by the CBN on February 14, 2024, highlighted the rationale behind the decision. It stated, “The Central Bank has noted the practice of transferring proceeds of crude oil exports by IOCs offshore to fund parent accounts (cash pooling), which has repercussions on liquidity in the domestic foreign exchange market.”
To address this issue within the framework of ongoing reforms in the foreign exchange market, the CBN directed banks to implement the following measures: “Banks are permitted to pool cash on behalf of IOCs, with a maximum of 50 per cent of the repatriated export proceeds initially. The remaining 50 per cent may be repatriated after a period of 90 days from the date of inflow of export proceeds.”
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