FX transaction, tax… 7 ways IOCs can spend export proceeds in Nigeria

On May 6, the Central Bank of Nigeria (CBN) clarified its directive on the repatriation of export proceeds by international oil companies (IOCs).

The development is coming more than two months after the apex bank limited the transfer of proceeds from crude exports by IOCs to offshore parent company accounts.

CBN said the repatriation of export proceeds by the IOCs has an impact on liquidity in the domestic foreign exchange market, hence, the need to restrict 100 percent transfer to oversee parent companies.

“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,” CBN said.

In the reviewed policy, 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 during the prescribed 90-day period.

Within this timeframe, IOCs are allowed to utilise their restricted export proceeds in Nigeria for eight domestic transactions.

CBN listed petroleum profit tax, royalty and domestic contractor invoices as some of the financial obligations IOCs can settle with the restricted export proceeds.

Others are cash calls, domestic loan principal and interest payments, transaction taxes (including Nigerian Content Development NCD) Levy), education tax, and foreign exchange (FX) sale at the Nigerian Foreign Exchange Market.