The Central Bank of Nigeria (CBN) has placed limits on the transfer of proceeds from crude exports by international oil companies (IOCS) to offshore parent company accounts.
According to a circular dated February 14, 2024, signed by Hassan Mahmud, director, trade and exchange department, the transfer of funds by the IOCS has an impact on liquidity in the domestic foreign exchange market.
Due to the ongoing reforms in the foreign exchange market, CBN said it is necessary to take measures to reverse the trend.
In the circular, banks can only transfer 50 percent of repatriated export proceeds, on behalf of the IOCs, to their parent company offshore accounts - with the remaining 50 percent repatriated after 90 days.
The financial regulator said the transfer is subject to the approval of the CBN and the existence of a "cash pooling" agreement with the IOC's parent entity.
"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 foreign exchange market," CBN said.
"Banks are allowed to pool cash on behalf of IOCs, subject to a maximum of 50% of the repatriated export proceeds in the first instance.
"The balance of 50% may be repatriated after 90 days from the date of inflow of the export proceeds."
According to the CBN, the arrangement is subject to the fulfilment of documentation requirements including "prior approval of the CBN for the repatriation of funds under the "Cash PEN Pooling" transaction".
Other requirements listed by the apex bank are a statement of expenditure incurred by the IOC in the immediate past period relating to the "cash pooling", evidence of the source of foreign exchange inflows, and completion of relevant forex form(s) as required under extant regulations.
CBN said it remains dedicated to advancing openness in the Nigerian FX market and it will keep creating regulations to stabilise and expand the market.
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