Angola's parliament approved a law that forces overseas oil companies to pay their taxes and other transactions through the country's banking system, state news agency Angop reported. The new law means oil companies active in Africa's second largest crude producer after Nigeria will have to pay their taxes and their bills from overseas sub-contractors and suppliers in dollars through local banks.
Analysts have said the government has shown determination in winning its long battle with the oil companies to force them to use the domestic banks. Delays in passing oil legislation have deterred foreign partners from investing in Nigeria and turned their focus to Angola, enticed by the prospect of huge finds in ultra-deep water blocks known as sub-salt.
Already present in various deep water blocks off the Angolan coast, Britain's BP, France's Total, and Italy's Eni are among the international majors that were earlier this year awarded concessions to explore promising ultra-deep water blocks known as sub-salt.
Until now, the international oil firms were allowed to use overseas banks for their activities in Angola under a special regime, mainly because the African country's banking system was seen as still developing and unable to handle the transactions. Angop said the wording of the bill shows the government believes the national financial system has developed sufficiently to take an active role processing the oil industry's transactions. Analysts say the Angolan banking sector is solid, with its banks well managed and boasting resilient asset quality.
The country's main banks, which include state-owned Banco Africano de Investimento and local units of Portugal's Banco Espirito Santo and Banco BPI, are set to get a capital boost from the law, with some analysts saying around $10 billion could enter the financial system each year. Angola's economy relies heavily on oil revenues, which make up around 45 percent of gross domestic product and over 90 percent of export income.
Central bank Governor Jose de Lima Massano said last month the new law will help shore up the country's foreign reserves, an effort seen as crucial to protect the economy from the risk of shocks from possible oil price and demand drops.