The Central Bank of Nigeria (CBN) recently announced a series of policy interventions aimed at enhancing foreign exchange (FX) liquidity in the system and promoting transparency in FX transactions. These measures include restrictions on the repatriation of export proceeds by International Oil Companies (IOCs), changes in the payment methods for Personal Travel Allowance (PTA) and Business Travel Allowance (BTA), and a review of the allowable limit of price deviation for exports and imports.
Regarding the repatriation of export proceeds by IOCs, the CBN stated that IOCs would only be allowed to repatriate a maximum of 50 percent of export proceeds initially. The remaining 50 percent could be repatriated after 90 days from the date of inflow of the proceeds. This measure aims to minimize the negative impact on liquidity in the domestic FX market caused by the offshore transfer of funds by IOCs.
Furthermore, the CBN prohibited the payment of PTAs and BTAs by cash, mandating that these allowances must be disbursed through electronic channels only, such as debit or credit cards. This decision is intended to curb abuses and enhance transparency in FX transactions.
Additionally, the CBN announced a review of the allowable limit of price deviation for exports and imports to -15 percent and +15 percent of the global average prices, respectively, under the Price Verification System (PVS). This review aims to prevent over-invoicing of imports and under-invoicing of exports, thereby curbing excess outflow of foreign exchange.
The CBN emphasized the need for IOCs to have easy access to their export proceeds while ensuring minimal negative impact on FX liquidity in the Nigerian market. Repatriations will be subject to specified documentation requirements, including prior approval of the CBN, cash pooling agreements, and evidence of the source of foreign exchange inflows.
Overall, these policy interventions underscore the CBN’s commitment to promoting transparency and stability in the Nigerian FX market. The apex bank reiterated its dedication to developing policies to stabilize and deepen the market, while directing all banks to comply with the circulars issued.