CBN imposes 50% cap on IOCs repatriation

In a bid to address liquidity concerns in the Nigerian foreign exchange market, the Central Bank of Nigeria on Wednesday announced measures targeting international oil companies engaged in cash pooling practices.

According to a circular addressed to all authorised banks and signed by the Director, Trade and Exchange Department, Hassan Mahmud, the move comes amidst growing concerns over the impact of cash pooling on domestic liquidity.

Cash pooling, a common practice among IOCs, involves the transfer of proceeds from crude oil exports to parent accounts offshore.

While acknowledging the necessity for IOCs to access their export proceeds for offshore obligations, the CBN expressed concerns regarding its adverse effects on liquidity within the Nigerian forex market.

“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 of 50 per cent may be repatriated after 90 days from the date of inflow of the export proceeds,” the circular read.

To ensure compliance and transparency, the CBN has laid out stringent documentation requirements, including prior approval for repatriation, execution of cash pooling agreements, and submission of expenditure statements and forex forms.

“Prior approval of the CBN for the repatriation of funds under the “Cash Pooling” transaction; “Cash Pooling” agreement with the parent entity of the IOCs operating in Nigeria; 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; Completion of relevant Forex Form(s) as required under extant regulations,” the circular read in parts.

The CBN said it remains committed to promoting transparency in the Nigerian foreign exchange market and will continue to develop policies to stabilize and further deepen the market.

READ ALSO: CBN fails to account for $4.5bn in Foreign Reserves — Audit Report

All banks are required to comply with the circular and inform their customers accordingly.

The CBN has in recent times introduced reforms aimed at increasing liquidity in the forex market.

The CBN Governor Olayemi Cardoso in a recent interview said the bank uncovered invalid foreign overdue claims totalling $2.4 billion out of the $7 billion backlog of unmet dollar demand from investors and currency users.

He said the banks have successfully cleared about $2.3 billion and that the balance of the genuine arrears of dollar demand which is $2.2 billion will soon be cleared.

In a bid to address liquidity concerns in the Nigerian foreign exchange market, the Central Bank of Nigeria on Wednesday announced measures targeting international oil companies engaged in cash pooling practices.

According to a circular addressed to all authorised banks and signed by the Director, Trade and Exchange Department, Hassan Mahmud, the move comes amidst growing concerns over the impact of cash pooling on domestic liquidity.

Cash pooling, a common practice among IOCs, involves the transfer of proceeds from crude oil exports to parent accounts offshore.

While acknowledging the necessity for IOCs to access their export proceeds for offshore obligations, the CBN expressed concerns regarding its adverse effects on liquidity within the Nigerian forex market.

“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 of 50 per cent may be repatriated after 90 days from the date of inflow of the export proceeds,” the circular read.

To ensure compliance and transparency, the CBN has laid out stringent documentation requirements, including prior approval for repatriation, execution of cash pooling agreements, and submission of expenditure statements and forex forms.

“Prior approval of the CBN for the repatriation of funds under the “Cash Pooling” transaction; “Cash Pooling” agreement with the parent entity of the IOCs operating in Nigeria; 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; Completion of relevant Forex Form(s) as required under extant regulations,” the circular read in parts.

The CBN said it remains committed to promoting transparency in the Nigerian foreign exchange market and will continue to develop policies to stabilize and further deepen the market.

READ ALSO: CBN fails to account for $4.5bn in Foreign Reserves — Audit Report

All banks are required to comply with the circular and inform their customers accordingly.

The CBN has in recent times introduced reforms aimed at increasing liquidity in the forex market.

The CBN Governor Olayemi Cardoso in a recent interview said the bank uncovered invalid foreign overdue claims totalling $2.4 billion out of the $7 billion backlog of unmet dollar demand from investors and currency users.

He said the banks have successfully cleared about $2.3 billion and that the balance of the genuine arrears of dollar demand which is $2.2 billion will soon be cleared.