The Central Bank of Nigeria (CBN) has announced that International Oil Companies (IOCs) can sell 50% balance of their repatriated export proceeds to authorized forex dealers.
This is according to a new circular issued on May 31, 2024, to clarify a recent directive and is aimed at bolstering liquidity and stabilizing the foreign exchange (FX) market,
The circular provides critical insights following the initial release on May 6, 2024, which generated numerous inquiries regarding the specifics of forex sales by IOCs in the Nigeria Foreign Exchange Market.
Key Highlights of the Circular
- Repatriated Export Proceeds Sale: The CBN has authorized IOCs to sell 50% of their repatriated export proceeds directly to authorized forex dealers or eligible users of foreign exchange for eligible transactions. This move is expected to significantly increase forex availability in the market, thereby aiding in exchange rate stabilization.
- Flexibility in Fund Management: Additionally, if an IOC does not have any outstanding financial obligations to settle with the repatriated funds during or after the 90-day retention period, they are permitted to sell the remaining 50% balance entirely to authorized dealers. This provision ensures that IOCs can efficiently manage their forex without unnecessary restrictions, promoting better liquidity management.
The circular read: “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.
“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.”
What you should know
The apex bank earlier stopped IOCs operating in Nigeria from immediately remitting 100% of their forex proceeds to their parent company abroad.
According to the initial circular, IOCs are allowed to repatriate only 50% of their proceeds immediately while the other 50% will be repatriated 90 days from the day of inflow.
It further issued clarifications on the utilization of foreign exchange proceeds by IOCs.
The CBN’s new directive is poised to have a significant impact on the Nigerian forex market. By allowing IOCs to sell a substantial portion of their repatriated proceeds, the directive aims to boost forex liquidity, helping to mitigate volatility and foster a more stable economic environment.
