Central Bank Clarifies Export Proceeds’ Repatriation, Utilisation By Oil Companies

•Petroleum profit tax, royalty, education tax, others eligible for settlement

James Emejo in Abuja

Central Bank of Nigeria (CBN) yesterday clarified that 50 per cent balance of the repatriated export proceeds could be used to settle financial obligations in the country, whenever required, during the prescribed 90-day period.

The apex bank also emphasised that the initial 50 per cent of the repatriated proceeds could be pooled immediately or as when required.

CBN made the clarification in a circular dated May 6, 2024, which was signed by CBN Director, Trade and Exchange Department, Dr. Hassan Mahmud, and addressed to all authorised dealer banks.

The circular followed recent enquiries by banks and other stakeholders on its circular in respect of Cash Pooling requests by banks on behalf of IOCs.

CBN stated that banks might submit the request for cash pooling ahead of the expected date of receipt, supported by the required documents, for approval by the central bank.

It explained that expenses on petroleum profit tax, royalty, domestic contractor invoices, cash call, and domestic loan – principal and interest payment – were eligible for settlement from the balance 50 per cent.

Others include transaction taxes (Including Nigerian Content Development (NCD) Levy), education tax, and forex sales at the Nigerian Foreign Exchange Market.

Earlier in February, CBN introduced a cocktail of policy interventions to further boost FX liquidity in the system, declaring 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 central bank added that the balance of 50 per cent of export proceeds might be repatriated after 90 days from the date of inflow of the proceeds.

Equally, the central bank prohibited the payment of Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) by cash going forward.

The apex bank declared that 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).

However, the apex bank pointed out that the policy intervention on IOCs was in line with ongoing reforms in the foreign exchange market. It stated that 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 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.