Amid severe shortages of hard currency, the central banks of Ethiopia and Nigeria have undertaken a swap of USD 100 million in blocked funds, various reports indicate.
The swap involved utilizing the revenues of Ethiopian Airlines from Nigeria and the earnings of Dangote Cement in Ethiopia. This arrangement addresses the challenges faced by both companies in repatriating their profits due to the foreign exchange shortages prevalent in both countries.
Under the swap arrangement, Ethiopia gains access to funds that were previously blocked in Nigerian banks, allowing them to utilize these resources for various purposes within their economy. Similarly, Nigeria benefits from accessing funds that were previously held up in Ethiopia.
With an extensive flight network that covers major cities such as Lagos, Abuja, and Kano, Ethiopian Airlines has established a significant presence in Nigeria’s aviation industry.
Dangote Cement has also been a major player in Ethiopia’s construction sector for over a decade.
According to sources within the company, Dangote Cement encountered challenges in repatriating its profits in Ethiopian currency resulting in a buildup of money within the country. The central bank eventually presented Dangote Cement with a currency swap proposal. This proposal would enable Dangote to exchange its excess Ethiopian Birr for USD held by overseas firms operating in Ethiopia.
“The National Bank will pay us the equivalent swapped amount in Birr,” Ethiopian Airlines CEO, Mesfin Tassew, told Ethiopian publication The Reporter, adding there are no plans to swap the remaining amount.
How this Compares to a Crypto Swap
In a similar manner to the currency swap between Dangote Cement and Ethiopian Airlines, a crypto swap involves exchanging one cryptocurrency for another. Just as the currency swap aims to address the liquidity issues faced by companies, a crypto swap facilitates the conversion of one digital asset into another.
In this context of Dangote Cement and its accumulated Ethiopian Birr, if there were a corresponding cryptocurrency available that represents the Ethiopian Birr, a crypto swap could be considered. This would involve exchanging the accumulated Ethiopian Birr cryptocurrency for another cryptocurrency, such as Bitcoin or Ethereum, which could be held by overseas firms operating in Ethiopia.
Crypto swaps offer a decentralized and efficient method for exchanging digital assets, providing liquidity and flexibility to participants.
By leveraging the technology and infrastructure of cryptocurrencies, a crypto swap could potentially serve as an alternative solution to address the liquidity challenges faced by companies dealing with restricted fiat currencies.
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