Central Bank of Nigeria Scraps Oil FX Retention Rule, Hands IOCs Full Access to Export Proceeds

The Central Bank of Nigeria has scrapped a key restriction on oil export proceeds, allowing international oil companies to repatriate their earnings in full, in a move that signals a broader effort to sustain recent stability in the foreign exchange market and reinforce investor confidence.

In a circular dated March 25, the apex bank removed the “cash pooling” requirement that had limited immediate transfers of export proceeds to 50%, with the balance warehoused locally for up to 90 days. Under the new directive, oil exporters can now move 100% of their earnings through authorized dealer banks without delay, subject to documentation and periodic reporting.

The central bank said the decision is part of ongoing reforms to “further liberalize and deepen the market in line with current market realities,” underscoring a shift away from administrative controls introduced during periods of acute dollar scarcity.

For international oil companies, the policy reversal restores autonomy over cash-flow management, a critical issue in Nigeria’s upstream sector where concerns over capital mobility have weighed on investment sentiment. The previous framework, introduced in February 2024 at the height of FX shortages, had effectively locked up significant portions of export revenues, complicating treasury operations and raising the cost of doing business.

The move has been welcomed by industry executives, who say the removal of the restriction will improve liquidity management and reduce exposure to regulatory risk, even if it does not immediately translate into higher dollar supply within the system. The pace at which funds are repatriated or converted will depend on market conditions, oil prices, and corporate strategies.

The move is the latest in a series of coordinated measures by the CBN aimed at stabilizing the naira and strengthening the structure of the FX market.

Just a day earlier, the central bank issued another directive targeting diaspora remittances, ordering all International Money Transfer Operators to route transactions through designated naira settlement accounts held with authorized dealer banks. The instruction, contained in a March 24 circular signed by the Director of the Trade and Exchange Department, Dr. Musa Nakorji, is designed to tighten oversight of foreign inflows and improve transparency.

Under that framework, IMTOs are required to process all remittance inflows, beneficiary payments, and related settlements exclusively through these accounts, with funding restricted to proceeds from foreign exchange conversions within the official market. The policy, which takes effect from May 1, 2026, also mandates the use of real-time pricing benchmarks from the Bloomberg BMatch system to guide exchange rates.

Together, the two directives point to a clear strategy: reduce distortions, improve traceability of FX flows, and channel more transactions through formal banking structures.

The broader reform agenda has also included raising open-market interest rates to attract foreign portfolio inflows and removing caps on exchange rate spreads in the interbank market, allowing prices to better reflect underlying demand and supply conditions. These steps are part of a gradual unwinding of controls imposed during years of FX pressure triggered by weak oil revenues and the economic fallout from the COVID-19 shock.

Market participants say the combined effect of these measures has been a relative stabilization of the naira in recent months, though vulnerabilities remain. Liquidity is still sensitive to external shocks, including fluctuations in oil prices and geopolitical disruptions affecting global trade flows.

The decision to lift the oil export retention rule reflects a recalibration of priorities. Where the central bank once focused on retaining foreign currency within the domestic system, it is now leaning toward improving confidence and encouraging inflows by ensuring greater flexibility and transparency.