In the midst of the recent headlines regarding the return of Emirate Airlines and the lifting of the visa ban, an important piece of news seems to have gone unnoticed. As part of the agreement signed between Nigeria and the United Arab Emirates (UAE), a joint foreign exchange liquidity program is set to be implemented in the near future.
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Forex liquidity has been a challenge for Nigeria, but the UAE, renowned for the Abu Dhabi Investment Authority (ADIA), which manages the excess oil reserves of the Emirate of Abu Dhabi, boasts a sovereign wealth fund estimated to be worth a staggering $853 billion – the largest in the world.
So, how does Dubai plan to assist in easing Nigeria's forex issues? There are two potential avenues for support.
Firstly, a currency swap deal is being considered. This would involve exchanging the Nigerian naira for the UAE dirham. However, there is a concern that the trade volume between the two countries may not be substantial enough for this deal to have a significant impact. Over recent times, Nigeria's annual exports to the UAE have totaled less than $1 billion. Nonetheless, this option remains viable.
The second option, which appears more likely, is for the UAE to purchase stakes in Nigeria's state-owned companies. This could include the Nigerian Sovereign Investment Authority (NSIA), the Nigerian National Petroleum Corporation (NNPC), and the Nigeria Liquified Natural Gas (NLNG) company. In such a scenario, the UAE would acquire a portion of these profitable entities and, in return, provide Nigeria with billions of dollars equivalent in value.
It is crucial to note that in addition to these potential investments, there are also discussions underway regarding significant foreign direct investment (FDI) opportunities, which could bring billions more into Nigeria's economy.
As the details of the joint foreign exchange liquidity program are yet to be announced, Nigerians eagerly await further information on how Dubai will assist their country in resolving its forex challenges. For now, hopes are high that this collaboration will provide a much-needed boost to Nigeria's economic stability and growth.
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