…Move will liberalise FX Rules to Boost Market Confidence

The Central Bank of Nigeria (CBN) has officially removed the requirement for International Oil Companies (IOCs) to temporarily retain a portion of their export earnings within the country.

This strategic reversal allows oil firms to repatriate 100% of their proceeds immediately, a move designed to bolster investor confidence and improve liquidity in the foreign exchange market.

The new directive is contained in a circular dated March 25.

According to the circular, the apex bank scrapped the “cash pooling” policy that had been in place since February 2024. Under the previous rules, authorized dealer banks could only transfer 50% of oil export proceeds immediately, while the remaining balance was mandated to be held for up to 90 days.

Under the new guidelines:

IOCs may now repatriate all export earnings through authorized banks with immediate effect.

Firms must still comply with standard documentation and monthly reporting requirements.

The reform grants companies total control over their cash-flow management and treasury efficiency.

Market Context and Rationale
The CBN stated that this shift is part of a broader effort to “further liberalize and deepen the market in line with current market realities.” By removing capital mobility barriers, the bank aims to stabilize the Naira and make Nigeria’s upstream sector more attractive to foreign investment.

The 50% cap was originally introduced during a period of acute dollar shortages when the Naira hit record lows. At the time, the bank sought to forcibly shore up local dollar liquidity.

However, the current administration has been steadily unwinding such controls, including raising open-market rates and scrapping caps on interbank spreads to move toward a more transparent, market-driven exchange regime.

Industry Impact
While analysts do not expect an immediate surge in dollar supply from this move alone, industry executives have welcomed the change. The ability to deploy earnings without a mandatory 90-day holding period significantly lowers financial risk and improves the ease of doing business for major players in the energy sector.