Nigeria has accessed $1.5 billion from a $5 billion Total Return Swap facility arranged with First Abu Dhabi Bank (FAB), pressing ahead with the financing despite warnings from the International Monetary Fund (IMF) about the loan’s opacity and long-term fiscal risks.
The facility was authorised by Nigeria’s National Assembly on 31 March 2024, with lawmakers subsequently characterising its terms as competitive. The initial tranche is priced at 395 basis points above the Secured Overnight Financing Rate (SOFR) — a global benchmark for short-term borrowing costs — with subsequent tranches set at SOFR plus 400 basis points.
Proceeds from the arrangement are earmarked for three purposes: supporting Nigeria’s 2026 fiscal budget, funding critical infrastructure projects, and restructuring existing debt liabilities. Nigeria will provide collateral equivalent to 133.3% of the loan’s value in naira-denominated assets.
The deal deepens Nigeria’s existing exposure to FAB, which had already extended approximately $1.2 billion in loans to support construction of part of a new expressway in the country. The Total Return Swap structure — a financing mechanism in which one party transfers the economic performance of an asset to another in exchange for funding — has drawn scrutiny precisely because of its complexity.
The IMF raised concerns earlier this month, warning that such financial structures can be opaque and difficult to assess fully in terms of risk exposure. The Fund did not, according to available reporting, specify the precise nature of the long-term risks it foresees, but its caution signals broader unease about how the arrangement fits within Nigeria’s overall debt management framework.
Nigeria’s decision to proceed regardless reflects a pattern seen across several African economies: governments increasingly turning to bilateral and commercial financing arrangements — particularly from Gulf state institutions — when multilateral lending conditions prove restrictive or slow-moving. For investors and policymakers tracking Nigeria’s debt strategy, the FAB facility raises questions about contingent liabilities that may not be immediately visible in standard sovereign debt disclosures.
The country’s debt profile has been under sustained scrutiny. Debt servicing has consumed a significant share of government revenues in recent years, and the administration of President Bola Tinubu has pursued a range of fiscal reforms since taking office in 2023, including the removal of fuel subsidies and a managed float of the naira. The new UAE facility adds a further layer to a financing mix that already includes Eurobonds, multilateral loans, and domestic borrowing.
How Nigeria manages the terms, collateral obligations, and disclosure requirements attached to the FAB arrangement will be closely watched — both by the IMF and by creditors assessing the country’s broader creditworthiness.
