CBN Restricts Export Proceeds’ Repatriation by Oil Companies

·      Pegs maximum allowable outflow at 50% in first instance, balance of 50% after 90 days

·      Bans payment of pta/bta by cash, okays electronic channels to stem abuses, enhance transparency

·      Reviews allowable limit of price deviation for exports, imports

James Emejo in Abuja

In a cocktail of policy interventions to further boost foreign exchange (FX) liquidity in the system, the Central Bank of Nigeria (CBN), yesterday, declared that going forward, International Oil Companies (IOCs) would only be allowed to repatriate a maximum of 50 per cent of export proceeds in the first instance. The balance of 50 per cent of the export proceeds might be repatriated after 90 days from the date of inflow of the proceeds, CBN added.

The measures were contained in a circular dated February 14, 2024, and titled, “Requirements for Foreign Currency Cash Pooling on Behalf of International Oil Companies (IOCs) in Nigeria.” It was signed by CBN Director, Trade and Exchange Department, Dr. Hassan Mahmud, and addressed to all authorised dealer banks.

The central bank also prohibited the payment of Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) by cash, going forward. It said PTAs and BTAs must, henceforth, be disbursed through electronic channels only, including debit or credit cards, to curb abuses and boost transparency in FX transactions.

Furthermore, CBN announced the review of the allowable limit of price deviation for exports and imports to -15 per cent and +15 per cent of the global average prices, respectively, under the Price Verification System (PVS).

The apex bank pointed out that the policy intervention on IOCs was in line with ongoing reforms in the foreign exchange market. It said proceeds of crude oil exports by the IOCs operating in the country were often transferred offshore to fund their respective parent accounts, otherwise referred to as “cash pooling”.

CBN said this practice had an adverse effect on liquidity in the domestic foreign exchange market.

The central bank pointed out that while it strongly supported the need for IOCs to have easy access to their export proceeds, particularly to meet their offshore obligations, such repatriations must be done with minimal negative impact on liquidity in the Nigerian foreign exchange market.

The bank stated that repatriations would be subject to the fulfilment of specified documentation requirements, including prior approval of the CBN for the repatriation of funds under the “Cash Pooling” transaction; Cash pooling agreement with the parent entity of the IOCs operating in Nigeria; statement of expenditure incurred by the IOC in the immediate past period relating to the cash pooling; evidence of the source of foreign exchange inflows, as well as completion of relevant forex form (s) as required under extant regulations.

The central bank further reiterated its commitment to promoting transparency in the Nigerian foreign exchange market, adding that it would continue to develop policies to stabilise and further deepen the market.

The apex bank, while directing all banks to comply with the circular, stressed that going forward, banks were allowed to pool cash on behalf of IOCs subject to the conditions stated.

Equally, yesterday, the central bank, in a separate circular to banks, prohibited payment of PTAs and BTAs by cash, saying they must, henceforth, be made only through electronic channels.

The circular, titled, “Allowable Channels for Payout of Personal Travel Allowance (PTA) and Business Travel Allowance (BTA),” was also signed by Mahmud.

CBN explained that the move was in line with its commitment to ensure transparency and stability in the foreign exchange market and avoid foreign exchange malpractices.

The circular stated, “All authorised dealer banks shall henceforth effect payout of PTA/BTA through electronic channels only, including debit or credit cards.

“For the avoidance of doubt, payment of PTA/BTA by cash is no longer permitted.”

In yet another circular to banks, CBN, while citing global inflation and other related challenges, announced the review of the allowable limit of price deviation for exports and imports to -15 per cent and +15 per cent of the global average prices, respectively.

The circular, titled, “Allowable Deviation Limit on the Price Verification System (PVS),” which was signed by Mahmud, clarified that the system was not meant to determine the actual prices of items for tariffs or duty charged by the government. Rather it was to enable the CBN curtail the excess outflow of the limited foreign exchange through over-invoicing and other price manipulation activities, the apex bank said.

CBN recalled that following the implementation of the PVS to curb over-invoicing of imports and under-invoicing of exports, it had in a circular referenced TED/FEM/FPO/PUB/01/001 stated that declared prices of import items that were more than 2.5 per cent above the global average prices of the referenced item would be queried.