Good News for Naira as CBN Tells Oil Companies to Sell Dollar to Dealers, Users

• The CBN has given the go-ahead for international oil companies to sell their 50% remaining repatriated export revenues
• This is an update from the earlier instruction by the CBN for IOCs to transfer 50% of profits from oil exports to offshore parent company accounts
• It stated that the 50% balance may also be sold to authorised dealers or eligible users of foreign exchange

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

The Central Bank of Nigeria (CBN) has said that International Oil Companies (IOCs) are allowed to sell their 50% remaining repatriated export revenues on the Nigeria foreign exchange market.

This was disclosed by CBN on Friday in a circular signed by W.J. Kanya, director of the trade and exchange department.

CBN's earlier instructions to IOCs

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On February 14, the CBN restricted IOCs' ability to transfer profits from oil exports to offshore parent company accounts.

Export Proceeds are the foreign exchange an exporter receives from the proceeds of Export activities.

The transfer of export proceeds by the IOCs has an effect on domestic foreign exchange market liquidity, according to the apex bank.

The CBN asserts that action must be taken to buck the trend because of the ongoing changes to the foreign exchange market.

According to the CBN, banks are only permitted to transfer 50% of the export revenues that have been repatriated on behalf of the IOCs to the offshore accounts of their parent companies; the remaining 50% would be repatriated after ninety days.

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Additionally, the financial regulator announced on May 6 that it had examined the order regarding the repatriation of export proceeds.

According to CBN, IOCs can utilise half of their export earnings to pay off debts in Nigeria, while the other half can be repatriated immediately or as needed.

Samuel Oyekanmi, a research and insight associate with Norrenberger Financial Group said,

"what will be great is to ensure improved liquidity in the official market, bridging the arbitrage caused by the disparity between the official and the parallel market, and nip the impact of FX shocks on prices in the bud."

CBN gives update on repatriated export proceeds

In a new development, CBN said:

"Following the release of the circular dated May 06, 2024, referenced TED/FEM/PUB/FPC/001/008, in respect of Cash Pooling by banks on behalf of IOCs, we received several requests for clarification on item No 3(8) on forex sales at the Nigeria Foreign Exchange Market”.

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“50% balance of the repatriated export proceeds may be sold to authorised dealers or eligible users of foreign exchange with eligible transactions”.

“If the IOC does not have any financial obligation to settle with the funds during or after the 90 days retention period, the 50% balance may also be sold wholly as stated in (1) above,”

The balance for cash calls, principal and interest payments on domestic loans, transaction taxes (including the Nigerian Content Development (NCD) Levy), and education tax are a few of the financial commitments listed by the CBN.

Another big oil firm ditches Nigeria

Legit.ng reported that french oil firm, TotalEnergies plans to invest $600 million in 2024 to boost exploration and production efforts in the Republic of Congo, snubbing Nigeria's oil and gas industry for the second time consecutively.

The CEO of TotalEnergies, Patrick Pouyanne, announced in Kenya that the business decided to invest $6 billion in Angola rather than Nigeria because of the latter's inconsistent policies and other problems.

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In a recent development, the business declared that it would invest $600 million in oil production and exploration in Congo—again ignoring Nigeria, the continent's biggest oil producer.

Proofreading by Nkem Ikeke, journalist and copy editor at Legit.ng.

Source: Legit.ng