Central Bank Of Nigeria Restricts Outflow of Oil Companies’ Foreign Exchange Earnings

The Central Bank of Nigeria has recently implemented a new policy that affects International Oil Companies (IOCs) by placing restrictions on the repatriation of their foreign exchange earnings to their parent companies abroad, Aso Naija Reports.

Under the new policy, IOCs are no longer permitted to transfer all of their proceeds immediately.

According to a circular issued by the Director of Trade and Exchange at the Central Bank, Hassan Mahmud, the policy requires foreign oil firms to withhold 50 percent of their earnings initially, with the remaining 50 percent being withheld for a period of 90 days before it can be repatriated.

The purpose of this policy is to ensure that IOCs have access to their export proceeds in order to fulfill their offshore obligations. The Central Bank acknowledges the importance of allowing IOCs to access their funds, but also aims to minimize any negative impact on the liquidity of the Nigerian foreign exchange market.

The circular states that the Central Bank has observed a practice known as “cash pooling,” in which the proceeds of crude oil exports by IOCs are transferred offshore to fund the parent accounts of the companies. This practice has been affecting the liquidity of the domestic foreign exchange market.

Under the new policy, banks are still permitted to pool cash on behalf of IOCs, but they are limited to a maximum of 50 percent of the repatriated export proceeds initially. The remaining 50 percent can be repatriated after a period of 90 days from the date when the export proceeds are received. The Central Bank intends to maintain this policy as long as it has the least possible detrimental effect on the liquidity of the Nigerian foreign exchange market.