In a bid to address liquidity concerns in the domestic foreign exchange market, the Central Bank of Nigeria (CBN) has announced a significant shift in the repatriation process for international oil companies (IOCs) operating within the country.

in a circular signed by Hassan Mahmud, the Director of Trade and Exchange at the CBN, the apex bank highlighted the new regulation, stating, “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 pooling). This has an impact on liquidity in the domestic foreign exchange market.”

Under the new guidelines, IOCs will only be permitted to repatriate 50% of their proceeds immediately, with the remaining 50% to be repatriated 90 days from the date of inflow.

“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,” the circular further said.

The decision to implement these measures stems from the CBN’s commitment to ongoing reforms in the 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,” it noted.

Furthermore, the CBN introduced specific rules governing cash pooling by IOCs, including the requirement for CBN approval before fund repatriation and agreements between parent entities of IOCs and the CBN before cash pooling. Additional documentation such as expenditure statements and evidence of the source of foreign exchange inflow will also be mandated.

While the CBN aims to enhance liquidity in the forex market through these measures, concerns have been raised regarding their potential implications. Some analysts fear that IOCs might face similar challenges experienced by operators in other sectors due to delayed forex forward payments.

The CBN recently disclosed that it has successfully cleared about $2.3 billion of the estimated $7 billion owed. However, this was accomplished against the backdrop of adverse effects of delays, which have led to the exit of notable multinationals citing difficulties in operating as USD-dominated entities.

As the CBN races against time to implement these new regulations, their negative implications keep unfolding. While measures to stabilize domestic forex markets are crucial, experts have advocated the need to ensure a balance that doesn’t deter foreign investment or disrupt business operations.

Transparency, consistency, and clear communication have been mentioned as key elements to maintain investor confidence and sustain a conducive business environment.

Although the CBN’s implementation of new forex regulations for IOCs reflects its commitment to addressing liquidity challenges in the domestic market, careful monitoring and evaluation of its impact on both domestic and international stakeholders have been advocated to ensure a smooth transition and mitigate any adverse effects on the economy.

Amidst the ongoing economic hardship that is stirring relentless concern across the country, President Bola Tinubu delivered a resolute message on Thursday, outlining his administration’s strategies to alleviate hardships and enhance national resilience.

Addressing the nation from the State House, the President reiterated his government’s commitment to implementing indigenous solutions to confront the forex crisis, insecurity, and food security challenges. He noted the need to bolster local food production and eradicate rent-seeking practices associated with food importation among other things.

“My administration is dedicated to evolving home-grown solutions to tackle our nation’s food security challenges head-on,” he said.

“I will not establish a price control board, nor will I approve the importation of food. We must extricate ourselves from hits predicament because importation only enables rent seekers to perpetrate fraud and mismanagement at our collective expense,” he added.

These solutions were announced during an emergency meeting with state governors, Vice-President Kashim Shettima, and key security officials. The President also disclosed decisive measures to address the security of lives and property. Notably, he approved the formation of a committee, comprising state governors and federal representatives, to explore the potential establishment of state police, aiming to enhance grassroots security efforts.

Additionally, the president endorsed initiatives to train and equip forest rangers at sub-national levels to safeguard human and natural resources.

“I have also endorsed the training and equipping of forest rangers by sub-national governments to protect human and natural resources in our communities.

“My stance is unequivocal: we must move aggressively to examine the issues raised, including the potential for establishing state police,” he said.

Expressing concern over reports of food hoarding in certain areas, Tinubu instructed security agencies to coordinate closely and inspect warehouses to prevent speculators and hoarders from undermining food accessibility. He noted his administration’s stance against price controls and food importation, advocating for support to local farmers and the swift implementation of livestock development plans.

In a plea for trust in the Central Bank of Nigeria’s management of monetary policy, President Tinubu urged governors to prioritize the welfare of citizens in their development initiatives. He cautioned against disruptive speculations on foreign exchange rates, emphasizing the importance of allowing designated institutions to fulfill their mandates effectively.

“The “cacophony of postulations” on the fluctuation of foreign exchange rates is adversely affecting the market. Not everyone can be an expert. If we have assigned someone a task, we must allow them to perform it. If they fail, then we must find a way to quickly remove them from the system,” he said.

Conclusively, the President urged unity among leaders in addressing insecurities, food shortages, and educational challenges. He affirmed his government’s unwavering commitment to improving the nation’s revenue profile and called for collaborative efforts to overcome prevailing challenges.

Read the full address below:

Dear Nigerians,

My administration is dedicated to evolving home-grown solutions to tackle our nation’s food security challenges head-on including setting up schemes to bolster local food production and cut out all forms of rent-seeking tied to food importation.

I reiterated this commitment during my emergency meeting today at the State House, with all 36 state governors, the Vice-President, Kashim Shettima, the National Security Adviser, the Inspector-General of Police, the Director-General of the DSS, and some ministers.

ON THE SECURITY OF LIVES AND PROPERTY

1. I have approved the creation of a committee that includes state governors and federal government representatives to explore, among other things, the possibility of establishing state police.

2. I have also endorsed the training and equipping of forest rangers by sub-national governments to protect human and natural resources in our communities.

My stance is unequivocal: we must move aggressively to examine the issues raised, including the potential for establishing state police.

ON FOOD SECURITY

Following reports out of Kano and other areas about large-scale hoarding of food in some warehouses, I have instructed the National Security Adviser, the Inspector-General of Police, and the Director-General of the Department of State Services to coordinate closely to ensure that security agencies in the states inspect such warehouses and take follow-up action.

1. We cannot allow speculators, hoarders, and rent seekers to undermine our efforts to ensure that food is widely available to all Nigerians.

2. I will not establish a price control board, nor will I approve the importation of food. We must extricate ourselves from this predicament because importation only enables rent seekers to perpetrate fraud and mismanagement at our collective expense.

3. Instead, we will support our farmers with schemes that encourage them to cultivate more food for the nation.

4. We must also rapidly but thoughtfully implement our livestock development and management plans, including dairy farming and others.

ON MONETARY POLICY AND THE CBN

I urge all governors to trust the Central Bank of Nigeria with the management of our country’s monetary policy and emphasize the need for designated institutions to effectively fulfill their mandate.

The “cacophony of postulations” on the fluctuation of foreign exchange rates is adversely affecting the market. Not everyone can be an expert. If we have assigned someone a task, we must allow them to perform it. If they fail, then we must find a way to quickly remove them from the system.

I also ask our governors to always prioritize the welfare and prosperity of our people in their development programs, and I assure them that the federal government will continue to work diligently to improve the nation’s revenue profile.

As leaders, we must all work together to address issues of insecurity, food security, and out-of-school children.

Thank You

Bola Ahmed Tinubu
President