International Oil Companies (IOCs) can now sell authorised currency dealers 50% of the remaining revenues from their repatriated exports, according to a recent announcement by the Central Bank of Nigeria (CBN).
As per the latest circular released on May 31, 2024, which aims to provide clarification on a recent order and stabilise the foreign exchange (FX) market, this is the case.
After its first distribution on May 6, 2024, which sparked many questions about the details of FX sales by IOCs in the Nigerian foreign exchange market, the circular offers important insights.
Important Pointers in the Circular
Sale of Repatriated Export Proceeds: IOCs are now permitted by the CBN to sell 50% of their export earnings that are repatriated directly to approved forex dealers or other qualified foreign exchange users for qualified transactions. It is anticipated that this action will greatly boost the amount of forex available on the market, supporting the stabilisation of exchange rates.
Adaptability in the Management of Funds: Furthermore, an IOC may sell the full remaining 50% balance to authorised dealers if, at the end of the 90-day retention period, they have no unpaid debts to settle with the repatriated cash. Better liquidity management is encouraged by this clause, which guarantees that IOCs can effectively handle their foreign exchange without needless limitations.
The circular stated as follows: “We received multiple requests for clarification on item No. 3(8) on forex sales in the Nigeria Foreign Exchange Market following the issue of the circular dated May 06, 2024, referenced: TED/FEM/PUB/FPC/001/008, regarding Cash Pooling by banks on behalf of IOCS.”
“Consequently, we hereby provide the following clarifications.”
“(1) The 50% balance of the repatriated export proceeds may be sold to Authorized Dealers or eligible users of foreign exchange with eligible transactions.”
“(2) 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.”
Things To Note
Previously, the central bank prohibited IOCs with operations in Nigeria from sending their parent company overseas 100% of their foreign earnings right away.
As per the original circular, IOCs are permitted to return 50% of their earnings straight away, with the remaining 50% to be returned 90 days after the day of inflow.
It also provided answers regarding how IOCs use their foreign exchange earnings.
The latest directive from the CBN is expected to have a big effect on the Nigerian foreign exchange market. The order aims to increase forex liquidity by permitting IOCs to sell a significant amount of their repatriated revenues, so mitigating volatility and promoting a more stable economic climate.
