The Central Bank of Nigeria (CBN) has issued another circular in addition to its barrage of moves to boost foreign exchange liquidity, with the latest barring international oil companies (IOCs) from repatriating 100 per cent of their foreign exchange proceeds at once.
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 polling” has an impact on liquidity in the domestic forex market.
According to the new guidelines, IOCs will now be allowed to repatriate only 50% of their proceeds immediately while the balance of 50% will be repatriated 90 days from the day of inflow.
“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.
“While the CBN strongly supports the need for IOCs to have easy access to their export proceeds, particularly to meet their offshore obligations, this must be done with minimal negative impact on liquidity in the Nigerian foreing exchange market,” it stated.
It noted that in line with the ongoing reforms in the foreign exchange market, it has become necessary to take measures to address this trend. Thus, it directed that “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 50 per cent may be repatriated after 90 days from the date of inflow of export proceeds.”
Furthermore, the apex bank 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, parent entity of IOCs will have to reach an agreement with the CBN before “cash polling.”
The bank also required IOCs to submit statement of expenditure incurred in the period prior to the cash polling, evidence of the source of foreign exchange inflow, as well as completion of relevant forex form(s) as required under extant regulations.
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