The apex bank made the requirements known in a circular dated February 14, 2024, signed by the Director of Trade and Exchange Department, Dr. Hassan Mahmud, and sent to all authorised dealer banks in the country.
The Central Bank of Nigeria (CBN) has released the requirements for foreign currency cash pooling on behalf of International Oil Companies (IOCs) in Nigeria.
The apex bank made the requirements known in a circular dated February 14, 2024, signed by the Director of Trade and Exchange Department, Dr. Hassan Mahmud, and sent to all authorised dealer banks in the country.
The CBN said that it 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 also referred to as "cash pooling".
The bank said, “This has an impact on liquidity in the domestic foreign exchange market, noting that while the CBN strongly supports the need for IOCs to have easy access to their export proceeds, particularly to meet their offshore obligations, this must be done with minimal negative impact on liquidity in the Nigerian foreign exchange market.”
The bank stated that 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 direct as follows: Banks are allowed to pool cash on behalf of IOCs, subject to a maximum of 50% of the repatriated export proceeds in the first instance.
“The balance of 50% may be repatriated after 90 days from the date of inflow of the export proceeds.
“The above shall be subject to the fulfillment of the following documentation requirements: Prior approval of the CBN for the repatriation of funds under the "Cash Pooling" transaction. ‘Cash Pooling’ agreement with the parent entity of the IOCs operating in Nigeria.
“Statement of expenditure incurred by the IOC in the immediate past period relating to the ‘Cash Pooling’. Evidence of the source of foreign exchange inflows.
“Completion of relevant Forex Form(s) as required under extant regulations.
“The CBN remains committed to promoting transparency in the Nigerian Foreign Exchange Market and will continue to develop policies to stabilize and further deepen the market.
“All banks are required to comply with this circular and inform their customers accordingly.”
The apex bank also released the allowable deviation limit on the price verification system to curb the over-invoicing of imports and under-invoicing of exports.
The bank stated, “Following the implementation of the Price Verification System (PVS) to curb over-invoicing of imports and under-invoicing of exports, the CBN in a circular referenced TED/FEM/FPO/PUB/01/001 stated that declared prices of import items that are more than 2.5 percent above the global average prices of the referenced item will be queried.
“However, due to global inflation and other related challenges, the CBN has reviewed the allowable limit of price deviation for exports and imports to -15% and +15% of the global average prices, respectively.”
The CBN said that Authorized Dealer Banks and the general public are advised to note and comply accordingly, adding that the PVS is not meant to determine the actual prices of items for tariffs or duty charged by the government but rather to enable the CBN to curtail the excess outflow of the limited foreign exchange through over-invoicing and other price manipulation activities.