THE Central Bank of Nigeria (CBN) has clarified earlier directives to banks regarding foreign exchange “cash pooling” requirements on behalf of international oil companies (IOCs) in the country.

In a circular on Tuesday, May 7, the CBN said the clarification was a response to the queries raised by banks and other stakeholders.

The ICIR reports cash pooling is the consolidation of a company’s various bank accounts into a single account or “pool,” which is used to manage the company’s overall cash position.

In a circular dated February 14, the CBN disclosed that IOCs had been repatriating 100 per cent of crude oil export proceeds offshore to their parent companies.

It said the action directly impacted liquidity in the domestic foreign exchange market and directed all authorised dealer banks to follow specific guidelines. 

The guideline is for the banks to pool 50 per cent of the repatriated proceeds immediately or when needed for the IOCs, and the balance of 50 per cent can be repatriated 90 days after the export proceeds’ inflow date.

In the new circular issued on Tuesday, CBN stated, “The initial 50 per cent of the repatriated proceeds can be pooled immediately or as when required. Banks may submit the request for cash pooling ahead of the expected date of receipt, supported by the required documentation, for approval by the Central Bank of Nigeria.

The apex bank said the 50 per cent balance of the repatriated export proceeds could be allocated to meet financial obligations within Nigeria, as and when required, within the stipulated 90-day period.

It listed the expenses as petroleum profit tax, royalty, domestic contractor invoices, cash calls, domestic loan and interest payments, transaction tax, education tax, and forex sales in the Nigerian foreign exchange market.

The ICIR reports that the apex bank has initiated various measures to address the illiquidity in the country’s foreign exchange market. However, much remains to be done to achieve the apex bank’s pursuit of price stability.