Nigeria and Ethiopia central banks swap $100m of blocked funds due to currency shortage

Nigeria and Ethiopia are holding several millions of US dollars between the two countries because there is a shortage of hard currency and businesses from the countries operating across, are unable to access their funds.

The central banks of the two countries therefore struck a deal in which they swapped the revenues of two companies – Dangote Cement in Ethiopia and that of Ethiopian Airlines in Nigeria.

According to a report by Ethiopian news outlet, The Reporter, the currency deal involves swapping revenues of Ethiopian Airlines from Nigeria and earnings of Dangote Cement in Ethiopia, as the two companies struggled to repatriate profits amid forex shortages in both countries.

The report indicates that the swap arrangement enables Ethiopia to access funds blocked in Nigerian banks, while Nigeria gains access to money held up in Ethiopia.

Ethiopian Airlines is the largest foreign carrier operating in Nigeria, with extensive flight networks spanning major cities like Lagos, Abuja and Kano.

Dangote Cement has been a major player in Ethiopia’s construction sector for over a decade. The company has the capacity to produce 2.5 million tons of cement yearly, the report added.

It however said, citing company sources that, as Dangote became unable to repatriate its profits in Ethiopian currency, money began piling up within the country.

“With funds stuck in Ethiopia, the central bank finally offered Dangote a currency swap proposal, allowing it to exchange its excess Ethiopian birr for US dollars held by overseas firms operating in Ethiopia,” the report said.

Citing officials, the news outlet said the currency swap allows Ethiopia to access funds blocked in Nigerian banks – including large amounts owed to Ethiopian Airlines – while Nigeria gains access to Ethiopian funds through Dangote Cement, a major Nigerian firm operating in Ethiopia.

Sources at the Central Bank of Ethiopia confirmed it had reached an agreement with its Nigerian counterpart to conduct a “temporary swap of foreign currencies.”

Aviation sources say Ethiopian Airlines exchanged $100 million of the $180 million in blocked funds in Nigeria for birr from Dangote Cement.