CBN Stops 100% Foreign Currency Repatriation by IOCs
The Central Bank of Nigeria (CBN) has stopped 100% foreign currency repatriation by International Oil Companies, according to an official statement posted on its website. The move is to curb foreign currency supply challenges facing the country, analysts said in a chat with MarketForces Africa.
As part of an effort to clean up loopholes in the forex market, the apex bank took the decision having noted that IOCs’ foreign exchange earnings upstream to their parent companies at once have negative impacts on the local foreign currency market.
Recently, IOCs were permitted to trade their US dollars and other foreign currencies proceeds through the official FX market to boost liquidity level. Unfortunately, this has failed to support the Nigerian FX market as the naira continues to decline.
In the circular, Director of Trade and Exchange, Hassan Mahmud said the measures are to make the foreign exchange market liquid. The CBN said it observed that proceeds of crude oil exports were transferred offshore to fund their parent accounts of IOCs.
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.
“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 CBN said it remains committed to promoting transparency in the Nigerian Foreign Exchange Market and will continue to develop policies to stabilise and further deepen the market.
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