Nigeria has accessed the first tranche of its $5 billion derivatives financing arrangement with First Abu Dhabi Bank (FAB), drawing about $1.5 billion under the deal approved by the national assembly in March.
According to Bloomberg on Friday, the federal government
received the funds in the past two weeks through a structured total return swap
(TRS) transaction with the United Arab Emirates’ largest lender, citing people
familiar with the matter.
On March 31, the national assembly approved President Bola
Tinubu’s request to secure up to $6 billion in external borrowing.
The borrowing plan comprised two facilities from the United
Arab Emirates (UAE) and the United Kingdom, including a structured TRS
financing programme of up to $5 billion from First Abu Dhabi Bank.
Tinubu had said the proposed borrowing would increase
Nigeria’s public debt stock, which stood at $110.3 billion (about N159.2
trillion) as of December 31, 2025.
The drawdown comes despite concerns raised by Fitch Ratings
over the financing arrangement.
Fitch warned that while such transactions can provide
liquidity, diversify funding sources and lower borrowing costs, they often fall
outside conventional debt-reporting frameworks and could weaken transparency
and legislative oversight.
The rating agency also said the structure could expose
Nigeria to additional foreign exchange risks if domestic bond yields rise or
the naira depreciates.
Also, the International Monetary Fund (IMF) has cautioned
that the derivative-based financing arrangements are often opaque and complex,
making it difficult to assess the full extent of governments’ debt obligations.
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