The Central Bank of Nigeria (CBN) has issued fresh guidelines on remittance of proceeds of crude exports by International Oil Companies (IOCs) operation in the country.
In a circular signed by the apex bank’s Director of Trade and Exchange, Hassan Mahmud, the practice known as “cash polling” has an impact on liquidity in the domestic forex market.
According to the new guidelines, IOCs will now be allowed to repatriate only 50 per cent of their proceeds immediately while the other 50 per cent will be repatriated 90 days from the day of inflow.
“The Central Bank has observed that proceeds of crude oil exports by International Oil Companies (IOCs) operating in Nigeria are transferred offshore to fund parent accounts of the IOCs (otherwise referred to as cash polling). This has an impact on liquidity in the domestic foreign exchange market”
“In line with the ongoing reforms in the foreign exchange market, it has become necessary to take measures to address this trend. Consequently, the CBN hereby directs as follows;
“Banks are allowed to pool cash on behalf of IOCS, subject to a maximum of 50 per cent of the repatriated export proceeds in the first instance.
The Balance 50 per cent may be repatriated after 90 days from the date of inflow of export proceeds.”
Furthermore, the apex bank introduced rules that will guide “cash polling” by IOCs going forward. They include approval from the CBN before repatriation of funds under the cash polling framework, parent entity of IOCs will have to reach an agreement with the CBN before “cash polling.”
The bank also required IOCs to submit statements of expenditure incurred in the period prior to the cash polling. Others are- “evidence of the source of foreign exchange inflow.”
“Completion of relevant forex form(s) as required under extant regulations.”
The CBN mandated all banks to inform their customers and comply with the regulation.
While this new policy might achieve its objectives, it risks throwing IOCs into the same pit operators in the manufacturing and aviation industry faced with billions of delayed forex forward payments.
In the last interview by the Governor, he explained that the bank has successfully cleared about $2.3 billion of the estimated $7 billion owed.
