The Ethiopian and Nigerian central banks have agreed to swap funds trapped in their respective states, which will see Ethiopian Airlines (ET) recover up to $100 million trapped in Nigeria.
Both countries have blocked a significant amount of airline funds, with a low allocation of USD to their aviation industries due to severe foreign currency shortages. The agreement between the central banks involves exchanging Ethiopian Airlines’ funds in Nigeria for Dangote Cement’s funds trapped in Ethiopia.
Trapped funds in Nigeria
Ethiopian Airlines is the largest foreign operator in Nigeria and a significant contributor to the development of the country’s air transport market. Nigerian banks hold about $180 million of ET’s revenue. Ethiopia can access blocked funds in Nigeria through the swap agreement, including money owed to the flag carrier.
According to The Reporter, Ethiopian Airlines received about $100 million of its blocked funds by converting Dangote Cement’s money in Ethiopia to local currency (ET Birr). However, there are currently no plans to retrieve the remaining $80 million. ET CEO Ato Mesfin Tasew said;
“The National Bank will pay us the equivalent swapped amount in Birr.”
According to figures released by the International Air Transport Association (IATA) last month, Nigeria has about $812 million in airline funds trapped there. The West African nation remains at the top of the list, with about 35% of the world’s blocked airline funds. It also has more trapped funds than the other top five countries combined: Bangladesh, Algeria, Pakistan, and Lebanon.
The issue of blocked funds in Nigeria arose in 2020 when demand for foreign currency significantly outweighed supply. The issue worsened post-pandemic, with trapped funds increasing by $347 million between July 2022 and July 2023. This has affected the operations of Emirates, Ethiopian, and several other airlines, risking the development of aviation in the region.
Swap deal with Dangote
The same deal applies to funds trapped in Ethiopia. Nigeria’s central bank presented Dangote with the currency exchange proposal, which allows it to convert excess ET Birr for US Dollars. The West African state will access funds blocked in Ethiopia through the Nigerian cement-producing firm.
Dangote Cement is Sub-Saharan Africa’s leading cement company, producing over 48.6 million tonnes annually in ten countries. The firm has the largest cement plant in Ethiopia, producing up to 2.5 Million Metric Tonnes Annually. Although a swap deal is in place, sources say that Dangote still has over $200 million blocked in Ethiopia.
