CBN demands transaction evidence for repatriation, divestment of foreign investments

The Central Bank of Nigeria (CBN) has provided clarifications on its foreign investment rules.

In a circular signed by W. J. Kanya, acting director, trade and exchange department, on Thursday, the CBN said its directives in the foreign exchange manual, memorandum 20 section 2 (vi), apply to both divestments and repatriation of all certificates of capital importation (CCI) related transactions.

CCI, a certificate issued by an authorised dealer on behalf of the CBN, is issued to a foreign investor as evidence of an inflow of foreign direct capital investment, either as equity or debt; cash or goods.

In the section of the memorandum, CBN said if at any point in time, foreign investors want to “divest, they shall go back to the bank with the following documents: Evidence of electronic Certificate of Capital Importation; Evidence of redemption of the money market instrument”.

In the circular, CBN clarified its second requirement, saying investors need to provide evidence of redemption of investment in local currency assets, which includes money market instrument, debt securities, and equities.

“This is to clarify that the Foreign Exchange Manual, Memorandum 20 section 2 (vi) applies to both divestments and repatriation of all Certificate of Capital Importation (CCI) related transactions,” CBN said.

“For the avoidance of doubt, every divestment or repatriation of foreign investment be it a pre-liquidation or matured investment, should present the following documents:

“a) Evidence of electronic Certificate of Capital Importation. b) Evidence of redemption of investment in local currency assets (money market instrument, debt securities, equities, etc.).”

The directive comes at a period foreign investors liquidated more portfolio investments in the capital market than they purchased within the first half (H1) of 2024.

The Nigerian Exchange (NGX) Limited, in a report titled ‘Domestic & Foreign Portfolio Investment’ on July 24, said N311.41 billion worth of portfolio investments were liquidated by foreign investors in H1 of this year, compared to a foreign outflow of N73.06 billion recorded in the corresponding period in 2023.

In the report, NGX said foreign investment inflow accounted for N229.07 billion in H1 2024, against N72.02 billion reported in the same period last year.

Also, on February 15, CBN placed limits on the transfer of proceeds from crude exports by international oil companies (IOCs) to offshore parent company accounts.

According to the apex bank, the transfer of funds by the IOCs had an impact on liquidity in the domestic foreign exchange market.

However, on May 6, CBN said IOCs can repatriate 50 percent of their export proceeds immediately or when required, while the remaining 50 percent can be used to settle financial obligations in Nigeria.