According to a report, the central banks of Ethiopia and Nigeria recently consummated a $100 million currency swap transaction. Under the arrangement, an Ethiopian airliner was paid local currency equivalent to $100 million while Dangote Cement is said to have received a similar amount of nairas.
Ongoing U.S. Dollar Shortages
The central bank of Ethiopia is reported to have performed a $100 million currency swap transaction with its Nigerian counterpart. Under the swap agreement, Ethiopia’s national airliner, which has been unable to repatriate funds trapped in Nigeria, took over the Nigeria cement company Dangote Cement’s profits which were similarly stuck in Ethiopia.
According to a local report, the two central banks resorted to the swap transaction because the arrangement obviates the need for U.S. dollars when settling. As suggested in the report, the arrangement is seemingly suitable for Ethiopia and Nigeria which both face ongoing shortages of foreign exchange.
As has been reported by Bitcoin.com News, the two countries are among several African states facing persistent U.S. dollar shortages. The shortages have in turn led to the growth of the foreign exchange parallel market. Attempts to rein in the parallel market by both central banks have seemingly failed to channel the flow of the greenback away from the parallel market.
Under the arrangement, Ethiopian Airlines, which could not retrieve about $180 million from Nigeria, will receive the local currency equivalent of $100 million from the National Bank of Ethiopia (NBE). Likewise, Dangote Cement, which had over $200 million locked in Ethiopia’s financial system, would get paid nairas equivalent to $100 million by the Central Bank of Nigeria.
Meanwhile, the unnamed sources at NBE have reportedly characterized the swap transaction as a temporary measure. Mesfin Tassew, the CEO of the Ethiopian airline, suggested that the swap agreement only applicable to the $100 million and not for the entire blocked funds.
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