By OLOHIRENUAN JELUGBO
A Certificate of Capital Importation better known as CCI is a document obtained from the Central Bank of Nigeria (CBN) through the local commercial banks. The certificate proves that cash, equipment or a combination of both from foreign investors has been received by an entity incorporated in Nigeria.
Although there are many benefits to having the CCI, the most sought after is access to official rates for loan, dividend or interest payments to foreign lenders and investors.
The CCI in its current electronic format (e-CCI) was introduced on the 11th of September 2017 and serves multiple purposes, which are:
- Gives proper proof capital inflow.
Access to CBN rates for the repatriation of funds.
Access to a platform for monitoring FX movements into and out Nigeria; and
An officially recognised documentation of FX for entities involved in fundraising from foreign investors.
How are CCIs useful for businesses in the energy sector in Nigeria?
The Foreign Trade in Goods Statistics (Q1 – Q3, 2020) published by the National bureau of Statistics lis ts the total imports into Nigeria as over NGN8.4trn, of which imports of finished goods accounts for over 50%. The renewable energy sector in Nigeria is largely dependent on importation of equipment, paid for in forex, through foreign investment, by:
– Cash transfers to a Nigerian entity, or
– Direct payment to equipment vendors on behalf of a Nigerian entity.
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In the Nigerian renewable energy industry, foreign investments are largely repayable in USD. The repayment of these foreign currency denominated loans is more expensive for the entity, whose revenue & operations are denominated in NGN due to the USD/NGN exchange rate volatility.
Companies with existing loans in foreign currencies or intending to obtain such loans can mitigate additional costs due to the exchange rate volatility, by accessing official government forex rates by obtaining a CCI.
How to obtain a CCI.
CCIs are issued by the CBN, through any commercial bank for cash loans, equity, or equipment purchased. Applications can be made at the time of investment of funds or retrospectively. Companies with multiple CCIs can apply through a bank for viewing access to the Electronic Certificate of Capital Importation System platform (e-CCIS). The platform provides an overview of all CCI records issued by commercial banks and verified by the CBN.
In applying for a CCI, the bank verifies the source of funds by, validating the loan documents presented in support of the loan, confirming the telex provided as proof of transfer of funds, as well as any other additional documents presented (for equipment CCIs).
The Future of CCIs
The CCI process has been in existence since 2012. Despite this, there are still knowledge gaps, both from the issuing commercial banks and the renewable energy sector. It is a cyclical situation as organisations within the energy sector are largely unaware of the process of obtaining CCIs and its benefits to their organisations and investors. This is largely due to the rapid rise in prominence of the sector.
The knowledge gaps from the banks Is due to their lack of in-depth experience of the peculiarities of investment within the Nigerian renewable sector. There are not enough businesses within the Nigerian renewable energy sector applying for CCIs for them to have developed the expertise.
This lack of knowledge has led to Nigerian entities and their investors missing out on access to official foreign exchange rate for outflow of funds for loans, interest, & dividends transferred to their foreign investors without a CCI. This results in higher foreign exchange rates, higher finance cost, lower net profits and hence lower available profits for distribution. It would be advantageous for organizations within the Nigerian renewable energy sector, in conjunction with commercial banks to share information. This would be beneficial to both parties develop in-depth knowledge of the CCI processes, and the many advantages available to the industry via the process.
Jelugbo is the financial controller at a leading renewable energy firm. Contacted via firstname.lastname@example.org