Nigeria: CBN Relaxes Repatriation Rules for IECs

What happened: The Central Bank of Nigeria relaxed foreign-exchange repatriation rules for IECs, reversing unpopular regulations introduced in 2024.

Why it matters: The strict repatriation schedules ran counter to President Tinubu’s pro-business, pro-investment agenda; removing them improves the investment environment and may drive investor interest.

What happens next: The change could catalyze IEC FIDs before next year’s election, but investors should not mistake the move for confirmation of a robust macro outlook, with public debt and inflation risks to monitor.

The Central Bank of Nigeria (CBN) eased forex repatriation rules for IOCs in late March, granting the country’s largest foreign investors immediate and full access to their forex earnings through authorized banks.

The change scrapped the unpopular schedules imposed in February 2024, under which IECs had to keep half their forex earnings in Nigeria for 90 days before repatriation. The CBN said it expects the move to ease operational constraints for IECs and boost investor confidence.

Why Now? The Economic Case

Inflation is down, the naira is stable, revenues are ticking up, and oil theft is under better control than two years ago. Foreign exchange reserves are just shy of $50bn, up from $33bn in early 2024. CBN officials told us these were the conditions that enabled the loosening of forex controls.

The apex bank had never wanted to take what our contacts at the time had called the nuclear option, and they were keenly aware that the rules ran counter to President Bola Ahmed Tinubu’s otherwise energy-investor-friendly agenda. This change corrects that contradiction.

Why Now? The Political Case

Tinubu has been clear, including in talks with top IEC executives, that there is a link between energy deals and his second-term bid. He wants to ensure the maximum number of FIDs before Nigerians go to the polls next January. This would cement his legacy as the president who resurrected the country’s oil sector after a decade in the desert, and bolster big business backing for his second term.

The president’s energy officials, led by Special Advisor Olu Verheijen, are hard at work on deepwater fiscals they hope will capture a handful more pre-election FIDs. Drafted with the Bonga South West project as a priority, they are also designed to make other long-dormant projects more appealing.

Gov Yemi Cardoso’s decision on repatriation is the cherry on top of the impending fiscals — a move intended to make it hard to look away from Nigerian opportunities.

Why Now? The Competitive Case

It could make Nigeria competitive alongside regional peers like Angola, but Tinubu and his team are thinking globally, mindful that Guyana is the IEC ideal. Nigeria cannot be Guyana, but it can show it wants to be more like Guyana.

This competitive lens works the other way around, too. Nigerian officials are well aware of how poorly restrictive forex rules have played with IECs in some of their near neighbours, including Equatorial Guinea and Cameroon. A forex dispute between IOCs and the Bank of Central African States (BEAC) has drawn the attention of the Trump White House, which has intervened on corporates’ behalf.

With a full-on US charm offensive underway in Nigeria, the BEAC dynamic may have played into Tinubu and Cardoso’s calculations.

Risks to Watch on Repatriation

Looking at the context between 2024 and today, the timing of the change makes sense. In the context of the last four weeks, it is a riskier move.

Inflation will rise due to the conflict in Iran. Nigeria is insulated by the Dangote refinery in Lagos, but Nigerians have still been hit with a 65% pump price rise since the conflict started, a result of higher crude inputs at Dangote and the absence of the fuel subsidies Tinubu scrapped on his first day in office.

Meanwhile, the government has little scope to boost oil or LNG output because of technical and logistical constraints. The weight of cash for crude loans also limits the number of barrels available to NNPC.

There is a bizarre but feasible world in which NNPC has to borrow money to buy Nigerian crude at hefty premiums from the same trading houses with whom it swapped crude for cash at the height of the economic instability in 2024. These loans at NNPC sit alongside high public debt levels over $100bn.

In the event of a prolonged conflict that leads to resurgent inflation, a weaker naira and greater debt dependence, Cardoso may question whether he should have waited longer before changing the rules.