The Central Bank of Nigeria (CBN) has restricted International Oil Companies (IOCs) from remitting 100 percent of their forex proceeds abroad.
This was disclosed in a circular signed by the CBN Director of Trade and Exchange, Hassan Mahmud.
The policy which takes effect immediately, mandates IOCs to only repatriate 50 percent of their forex proceeds, while the other 50 percent will be repatriated from the day of inflow.
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The circular reads,
“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.
“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% of the repatriated export proceeds in the first instance. The Balance 50% 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, the parent entity of IOCs will have to reach an agreement with the CBN before “cash polling.”
The bank also mandated IOCs to submit statements of expenditure incurred in the period before the cash polling. Others are “evidence of the source of foreign exchange inflow.” “Completion of relevant forex form(s) as required’ under extant regulations.” The CBN mandated all banks to inform their customers and comply with the regulations.
As the naira continues to be on a free fall against the dollar in the past weeks with the currency losing value against the greenback, the CBN has continued to roll out different regulatory guidelines and measures to curb the fall of the naira.
To strengthen the national currency and stabilize the nation’s volatile exchange rate, the CBN directed Deposit Money Banks to sell their excess dollar stock latest February 1, 2024. The apex bank which made the disclosure via a circular, also warned lenders against hoarding excess foreign currencies for profit.
The Bank’s governor Cardoso argued that the foreign exchange market was facing increased demand pressures, causing a continuous decline in the value of the naira.
According to him, factors contributing to this situation include speculative forex demand, inadequate forex due to low remittance of crude oil earnings to the CBN, increased capital outflows, and excess liquidity from fiscal activities.
To address exchange rate volatility, he said a comprehensive strategy had been initiated to enhance liquidity in the forex market.