The Central Bank of Nigeria (CBN) has implemented new regulations restricting international oil companies (IOCs) from remitting 100% of their foreign exchange proceeds abroad in a single transaction. According to a circular dated February 14, 2024, issued by Hassan Mahmud, Director of the Trade and Exchange Department at the apex bank, IOCs are now required to repatriate 50% of their proceeds initially, with the remaining 50% to be remitted after a 90-day period.
The CBN cited concerns over the practice of “cash pooling,” where proceeds from crude oil exports are transferred offshore to fund parent company accounts, leading to liquidity challenges in the domestic foreign exchange market. In response to this trend and as part of ongoing reforms in the foreign exchange market, the CBN has introduced measures to address the issue.
Under the new directives, banks are permitted to pool cash on behalf of IOCs, but only up to a maximum of 50% of the repatriated export proceeds initially. The remaining 50% can be repatriated after a 90-day waiting period from the date of inflow of export proceeds.
These measures aim to regulate and manage the outflow of foreign exchange proceeds from Nigeria’s oil sector, ensuring greater stability and liquidity in the domestic foreign exchange market. By staggering the repatriation of export proceeds, the CBN seeks to mitigate the impact of cash pooling activities on the economy while promoting more prudent foreign exchange management practices.
As the CBN continues to implement reforms in the foreign exchange market, stakeholders will closely monitor the effects of these measures on the oil sector and the broader economy. Stay tuned for further updates as developments unfold in response to these regulatory changes.
