• Wednesday, July 17, 2024
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BusinessDay

Nigeria sweetens deal for oil investors with eased FX rules

Libya overtakes Nigeria to become top African oil producing country

In a bid to boost investor confidence, the Central Bank of Nigeria (CBN) has relaxed its foreign exchange (FX) repatriation rules for International Oil Companies (IOCs) operating in the country.

In a circular dated May 6, 2024 signed by Hassan Mahmud, director, trade and exchange department, the apex bank said oil firms can now spend 50 percent balance of the repatriated export proceeds on financial obligations.

In February, the apex bank stopped international oil companies from repatriating 100 percent foreign exchange proceeds to their mother companies overseas at once.

The apex bank had said international oil firms could repatriate 50 percent of their proceeds in the first instance and then the other half after 90 days.

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However, in its new directive, the CBN said, “Following the recent enquiries 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 follows:

“The initial 50% of the repatriated proceeds can be pooled immediately or as at when required. Banks may submit the request for cash pooling ahead of the expected date of receipt, supported by the required documentations, for approval by the Central Bank of Nigeria,” the apex bank said.

“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 CBN said petroleum profit tax, royalty, domestic contractor invoices, cash call, domestic loan principal and interest payment, transaction taxes, education tax and forex sales at the Nigerian Foreign Exchange Market are eligible for settlement from the balance 50percent.

 

Analysts believe the move is a calculated one. Easing FX repatriation restrictions signals a more investor-friendly environment, potentially enticing IOCs to ramp up investment in exploration and production activities.

 

This could lead to increased oil output, boosting government revenue and overall economic growth.