In a significant policy shift, the Central Bank of Nigeria (CBN) has announced that international oil companies (IOCs) can now sell 50% of their repatriated export proceeds in the Nigerian Foreign Exchange Market. This move, announced on Friday, aims to enhance liquidity in the domestic foreign exchange market and support economic growth.
The CBN had previously restricted the transfer of crude export proceeds by IOCs to their offshore parent company accounts, a measure implemented on February 14 to address declining liquidity in the domestic market. According to a circular signed by W.J. Kanya, Director of Trade and Exchange Department, banks could only transfer 50% of repatriated export proceeds to offshore accounts, with the remaining 50% to be retained for 90 days.
However, the CBN revised this directive on May 6, allowing IOCs to repatriate 50% of their export proceeds immediately or as needed, while the remaining 50% can be used to settle financial obligations within Nigeria.
The central bank's decision to allow IOCs to sell their retained proceeds in the Nigerian market is expected to boost market liquidity and foster economic growth. Following the circular dated May 6, 2024, referenced TED/FEM/PUB/FPC/001/008, the CBN received several requests for clarification regarding forex sales.
The CBN clarified that the remaining 50% of repatriated export proceeds could be sold to authorized dealers or eligible users of foreign exchange with qualifying transactions. If the IOC has no financial obligations to settle during or after the 90-day retention period, the 50% balance may also be sold entirely.
Financial obligations cited by the CBN include balances for cash calls, domestic loan principal and interest payments, transaction taxes (including the Nigerian Content Development Levy), and education tax.
This policy adjustment is part of the CBN's broader efforts to maintain a stable and liquid foreign exchange market, ensuring that the needs of IOCs are met while supporting Nigeria's economic stability.
