The Central Bank of Nigeria has provided additional clarifications on the circular concerning the cash pooling of repatriated oil and gas export proceeds by international oil companies.
The apex bank specified the expenses that can be settled from 50 per cent of the repatriated fund, which includes petroleum tax, royalty, domestic contractor invoices, cash calls, domestic loan payments, interest payments, education tax, transaction tax, and forex sales in the Nigerian foreign exchange market.
This announcement comes as a response to the queries raised by banks and other stakeholders regarding the previous circular in February.
This announcement was made through a circular with reference number TED/FEM/PUB/FPC/001/004 uploaded to its website and signed by the Director of the Trade and Exchange Department Dr Hassan Mahmud on Tuesday.
The statement read, “Following recent inquiries by banks and other stakeholders on our circular referenced TED/FEM/PUB/FPC/001/004, in respect of Cash Pooling requests by banks on behalf of IOCs, we provide further clarifications as:
“The initial 50% of the repatriated proceeds can be pooled immediately or as when required. Banks may submit the request for cash pooling ahead of the expected date of receipt, supported by the required documentation, for approval by the Central Bank of Nigeria.
“The 50% balance of the repatriated export proceeds could be used to settle financial obligations in Nigeria, whenever required, during the prescribed 90-day period.
“The under-listed expenses are eligible for settlement from the balance 50% Petroleum tax, Royalty, Domestic contractor invoice, cash call, domestic loan payment, interest payment, education tax, transaction tax, and forex sales at Nigeria foreign exchange market.”
In the previous circular, the CBN said it identified a common practice among IOCs where they transfer crude oil export proceeds offshore for cash pooling. It noted that this practice had a direct impact on the domestic foreign exchange market liquidity.
To mitigate these negative effects and as part of ongoing forex market reforms, the CBN introduced specific measures.
According to the new guidelines, banks are now allowed to pool cash for IOCs. However, there are certain requirements
The circular noted that IOCs are permitted to pool the first 50 per cent of the repatriated proceeds either immediately or when needed.
In the clarification made on Tuesday, CBN reiterated that banks have the green light to forward cash pooling requests before the actual date of receipt, which must be backed by the necessary documentation for CBN’s approval.
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The remaining 50 per cent of the repatriated export proceeds can be allocated to meet financial obligations within Nigeria, as and when required, within the stipulated 90-day period.
The directive aims to streamline the process for the repatriation and subsequent utilization of export proceeds.
This clarification is hoped to contribute to the stability of liquidity in the Nigerian foreign exchange market. The detailed guidelines on the use of repatriated funds are expected to promote a regulated and transparent framework for the management of foreign currencies.
For further details, stakeholders are encouraged to consult the complete circular available on the CBN’s official website.
