Cash Repatriation

Treasury FX & Banking in Nigeria

Report date: 
12 Jun 2023

Commentary

If a country ever deserved the term “Complex Country”, it has to be Nigeria. The country itself has a complex composition: it is made up of many varied ethnic groups who have a long history of strife between each other, including a very bloody civil war in the twentieth century. It has immense mineral wealth, especially oil, and some very crowded cities, which are often home to massive traffic jams. Despite the oil riches, the country has huge economic issues and a long history of exchange controls and significant devaluations – the naira has gone from parity with the US dollar in the 1970s to between 450 and 600 to the dollar today – depending on whether you use the official or the black market rate.

This brings us to one of the key challenges facing international companies operating in the country. The many regulations are applied in ways which are not always transparent, and there are many local players who show astounding creativity in finding ways round them. So the MNC’s dilemma: how do I make sure these solutions are truly legal before I use them?

In short, welcome to Africa.

Whatever the regulatory situation, Nigeria has a population of 80 million people, oil wealth, and a large diaspora. So it is an important market that is difficult to ignore. Participants all face the same issues:

  • Difficulty accessing foreign currency
  • Assessing various proposals, including brokers, private FX sales, buying offshore bonds
  • Trapped cash, and how to invest it
  • Which banks to deal with? Local banks are needed for collections in remote areas, and they usually
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Topics covered in this report: 
Hedging FX, Cash - deposits, Cash Repatriation, Trapped cash, Investments
Service providers discussed in this report: 
Citi, Crown Agents Bank, Standard Chartered, Stanbic Asset Management, United Capital, Zenith Bank, Guaranty Trust

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Treasury & FX in India

Report date: 
20 Feb 2023

Commentary

This Treasury Peer Call took place a few days after the announcement that India had officially overtaken China as the most populous country in the world. Given the increasing speculation that India might also replace China as the world’s fastest growing major economy, it seemed opportune to get a view on how things are developing.

All participants are bullish about their businesses in the country. Several already have significant operations, and most see major opportunities. The good news is that several participants are generating meaningful profits and cash – the bad news is that this creates issues in terms of cash investment and repatriation. And, of course, India is India – there are always plenty of regulations to navigate.

Main points and concerns:

  • For those companies who are generating cash, it is a challenge to invest it. Most retain a conservative approach, which means safe investments – these typically return a rate which is below inflation.
  • Cash repatriation is not without issues. The main vehicle is dividends: these attract withholding tax (the rate varies according to the jurisdictions), and are subject to complex tax rules. Cross border pooling is not allowed, and intercompany loans are subject to central bank approval.
  • Within India, cash pooling is
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Topics covered in this report: 
Investments, Hedging FX, Cash Pooling - domestic, Supply Chain Finance, Intercompany loans, HR, Payments-digital, Funding, Cash Repatriation
Service providers discussed in this report: 
Barclays, JP Morgan, Bank of America, Citi, Standard Chartered, HSBC, Deutsche Bank, BNP Paribas, MUFG, ICICI, HDFC, Kotak Mahindra Bank

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Treasury & FX in Bangladesh, Pakistan & Sri Lanka

Report date: 
20 Jan 2023

Commentary

Pakistan, Bangladesh, Sri Lanka – three countries with sizeable populations and even bigger economic and social problems. They are difficult places to do business at the best of times – but they have become even more problematic with recent world events, limiting tourism receipts in Sri Lanka and restricting the apparel export business in Bangladesh.

The themes across the three countries were remarkably consistent, though there are variations in the detail:

  • For all our participants, these are important markets, so they are staying there, even though it is very difficult to get currency out. However, one participant is in the process of divesting their entity in Pakistan.
  • FX has always been an issue in these countries, but it has got worse recently. However, the prospect of an IMF package has led to some improvement in Sri Lanka.
  • Officially, none of the countries has strict exchange control regulations, but in practice, they are restricting the outflows of hard currency by a series of administrative measures. Goods imports tend to be prioritised over services, royalties and dividends.
  • In Pakistan, central bank approval is required for all
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Topics covered in this report: 
Hedging FX, Cash Repatriation, Dividends, Royalties, Funding, Intercompany invoices, Letters of Credit (LC), Bank Relationships, Investing, Imports, intercompany netting
Service providers discussed in this report: 
HSBC, Standard Chartered, Deutsche Bank, Citi, Sampath Bank, Habib Bank, Commercial Bank (Sri Lanka)

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FX & Treasury in Egypt

Report date: 
1 Nov 2022

Commentary

Egypt is a challenging environment – but one which seems to work overall. The country went through a bad period in 2015/2017, when foreign currency was auctioned, and in very scarce supply. The situation then improved, but has recently deteriorated again. This is hardly surprising, given the role tourism plays in the economy, and the combined impacts of COVID and the Ukraine war.

The situation reported by all participants is that there are no formal exchange controls, but banks are rationing hard currency according to a priority system, under which essential goods, such as food and pharmaceutical goods, get paid first, and items such as services, royalties and intercompany debt are satisfied last – if there is any currency left. The way in which this is implemented varies from bank to bank, so it is vitally important to maintain good relationships with your banks. The common themes were:

  • Most participants sell hardware offshore in hard currency, and provide services onshore billed in Egyptian pounds. This has worked well, but the distributors are finding it increasingly difficult to get access to the hard currency.
  • Some are requiring LCs, on the grounds these improve the chances of getting hard currency when payment is due. However, banks are reluctant to issue them, and they can be very expensive.
  • Egypt is in advanced negotiations with the IMF over an aid package, which should ease the payment issues. This is expected to be accompanied by a devaluation: this is further complicating the FX
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Topics covered in this report: 
FX, Hedging FX, Letters of Credit (LC), Funding, Cash Repatriation
Service providers discussed in this report: 
Citi, HSBC

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Treasury & FX in Brazil

Report date: 
30 Jan 2019
  • Receivables are moving from paper to electronic, but Boletos continue to be challenging to achieve automated straight through reconciliation.
  • Capital Injections & Hedging, continues to be challenging and requires extensive planning and work to make sure there are no delays.
  • Cash Repatriation & Hedging, seems to be easier as long as documentation is correctly in place.
  • Cautious optimism for the economy in the year ahead. 
Topics covered in this report: 
Receivables, Boletos, Funding, Hedging FX, Cash Repatriation
Service providers discussed in this report: 
Bank of America

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Treasury & FX in Egypt

Report date: 
12 Feb 2019
  • Egypt is a prime example of how you need a different mindset in complex countries. Two years ago, we would have just heard tales of woe and people struggling to keep basic operations running. Now, it is beginning to work again. But for how long? These countries have cycles: it is important not to despair during the difficult periods, and not to get carried away during the good ones.

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Topics covered in this report: 
FX, Hedging FX, T-bills, Invoicing, Cash Repatriation, Banking
Service providers discussed in this report: 
SWIFT, Citi

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