The Central Bank of Nigeria (CBN) has revised its forex management policies, permitting International Oil Companies (IOCs) operating in the country to inject up to 50% of their oil and gas export proceeds into the Nigerian foreign exchange (forex) market.
This move aims to address liquidity concerns and promote transparency in the forex market.
According to a circular issued by the CBN’s Director of Trade & Exchange Department, Hassan Mahmud, IOCs are now allowed to utilise 50% of their repatriated export proceeds to settle specified local transactions and for sale to the Nigerian Foreign Exchange Market (NFEM).
The revised directive maintains the previous policy of allowing IOCs to repatriate 50% of their forex proceeds to their home countries immediately, with the remaining 50% available for repatriation after a 90-day period. However, the remaining 50% of the repatriated funds can now be used to settle various financial obligations locally during the prescribed 90-day period.
Eligible expenses for IOCs include the settlement of Petroleum Profit Tax, royalties, domestic contractor invoices, cash calls, domestic loan principal and interest payments, as well as transaction taxes such as the Nigeria Content Development levy, education tax, and forex sales at the NFEM.
The CBN emphasises that banks must obtain prior approval for cash pooling requests on behalf of IOCs and ensure compliance with relevant regulations, including the submission of necessary documentation and the completion of forex forms.
This move by the CBN underscores its commitment to promoting transparency and stability in the Nigerian forex market. The apex bank advises all banks to adhere to the circular and communicate the changes to their customers promptly.
The revision in forex management policies is expected to facilitate easier access to export proceeds for IOCs while minimising negative impacts on forex market liquidity. This measure aligns with the ongoing reforms in the forex market and reflects the CBN’s efforts to deepen and stabilise the market for sustainable economic growth.
