Ethiopia and Nigeria Swap $100M For Local Currency

Ethiopia and Nigeria Swap $100M For Local Currency

In a bid to mitigate the shortage of dollars which is currently affecting most African countries, the central banks of Ethiopia and Nigeria have swapped $100M in blocked funds.

This deal involved the swapping of revenues of Ethiopian Airlines from Nigeria and earnings of Dangote Cement in Ethiopia, which has been struggling to repatriate profits due to forex shortages in both countries.

This swap deal would enable Ethiopia to access funds that they have been struggling to gain from Nigerian banks, likewise, Nigeria would get access to money which have been stuck in Ethiopia.

Nigerians have benefited hugely from Ethiopian Airlines due to its extensive flight networks which cut across major cities like Lagos, Abuja, and Kano as well as foreign countries  While the airline has benefitted from strong patronage from Nigerian travelers going abroad but has resulted in much of its revenue being stuck in Nigeria.

Meanwhile, Dangote Cement which is a major player in the Ethiopian construction industry for over 10 years has also struggled to repatriate profits in Ethiopian currency where it produces up to 2.5 million tons of Cement yearly.

This situation was what caused the CBN to offer Dangote Cement the option of a currency swap proposal which would allow the exchange of its excess Ethiopian birr for USD held by overseas firms which are operating in Ethiopia.

According to sources at the Central Bank of Ethiopia, it has been confirmed that it had reached an agreement with the Central Bank in Nigeria to conduct a “temporary swap of foreign currencies.”

While Aviation sources also claim that Ethiopian Airlines exchanged USD 100M of the USD 180M in blocked funds in Nigeria for birr from Dangote Cement.

Airline CEO Mesfin Tassew told The Reporter saying “The National Bank will pay us the equivalent swapped amount in birr,”. It also added that there are no plans to swap the remaining amount. Other sources also claim Dangote still has over $200M stuck in Ethiopia.

Nigeria and Ethiopia have suffered greatly due to foreign currency shortages, with CBN  resorting to rationing dollars to reduce the effect of the shortages on its reserves while the National Bank of Ethiopia had to introduce reforms which is aimed at easing the burden of investors in their country.

The central bank has also begun to provide assurance to investors who are willing to invest in key sectors through public-private partnerships with the Ethiopian government for easy access to repatriating their profits.