CBN permits international oil firms to sell 50% of proceeds

The Central Bank of Nigeria on Friday, announced that international oil companies can sell their retained 50 per cent of repatriated export proceeds in the Nigerian Foreign Exchange Market.

This decision comes after the CBN placed limits on the transfer of crude export proceeds by IOCs to offshore parent company accounts on February 14.

The apex bank noted that these transfers affected domestic foreign exchange market liquidity and sought to reverse the trend through ongoing reforms.

According to a circular signed by the Director of Trade and Exchange Department, W.J. Kanya, banks can only transfer 50 per cent of repatriated export proceeds to IOCs’ offshore parent company accounts, with the remaining 50 per cent repatriated after 90 days.

However, on May 6, the CBN reviewed this directive, allowing IOCs to repatriate 50 per cent of their export proceeds immediately or as needed, while the remaining 50 per cent can be used to settle financial obligations in Nigeria.

This move aims to balance the needs of IOCs with the need to maintain liquidity in the domestic foreign exchange market.

By allowing IOCs to sell their retained proceeds in the Nigerian market, the CBN seeks to boost liquidity and promote economic growth.

However, in a new development, CBN said following the release of the circular “dated May 06, 2024, referenced TED/FEM/PUB/FPC/001/008, in respect of Cash Pooling by banks on behalf of IOCs, we received several requests for clarification on item No 3(8) on forex sales at the Nigeria Foreign Exchange Market”.

Providing more clarifications, the apex bank said the “50% balance of the repatriated export proceeds may be sold to Authorized Dealers or eligible users of foreign exchange with eligible transactions”.

“If the IOC does not have any financial obligation to settle with the funds during or after the 90-day retention period, the 50% balance may also be sold wholly as stated in (1) above,” CBN said.

Some of the financial obligations mentioned by the CBN are the balance for cash calls, domestic loan principal and interest payments, transaction taxes (including the Nigerian Content Development Levy) and education tax.