UAE’s largest bank considers sharing exposure to Nigeria’s $5 billion swap

First Abu Dhabi Bank PJSC (FAB), the United Arab Emirates’ largest lender, is considering sharing part of its exposure to Nigeria’s $5 billion total-return swap with other banks through a syndication arrangement.

Bloomberg reported the development on Thursday, October 1, citing people familiar with the matter, as FAB explores the possibility of selling down part of its position if there is sufficient appetite from other lenders.

The people asked not to be identified because the discussions are confidential, according to the report. FAB, however, remains committed to the transaction.

How FAB could share exposure

Under the proposed arrangement, FAB would likely remain Nigeria’s counterparty in the transaction while allowing other banks to take portions of its exposure. The UAE lender could also earn additional fees from the syndication.

This means FAB would not necessarily be exiting the financing arrangement, but could distribute part of the financial exposure to other lenders while maintaining its direct relationship with Nigeria.

• A total-return swap is a derivative transaction through which one party receives financing against assets pledged as collateral while transferring the economic returns and risks associated with those assets to another party.
• In Nigeria’s case, the government is providing naira-denominated securities worth about 133% of the financing as collateral.
• The Federal Government drew down $1.5 billion as the first tranche of the $5 billion facility in June, with the proceeds expected to support government spending and refinance more expensive debt.

Nigeria turned to the instrument as part of efforts to diversify its financing sources and reduce reliance on more expensive forms of borrowing, joining African countries including Angola and Senegal that have also used similar structures.

Nigeria’s swap faces debt scrutiny

The $5 billion total-return swap with FAB emerged in March 2026 as the Federal Government sought alternative financing to fund expenditure and refinance higher-cost obligations. The National Assembly subsequently approved the transaction, which the government presented as a way of accessing foreign-currency financing at a lower cost than some conventional borrowing options.

The structure has, however, attracted scrutiny over transparency and the potential implications for Nigeria’s debt management.

• In June, Fitch Ratings warned that the transaction could obscure sovereign debt risks and make any future debt restructuring more complicated, while acknowledging that total-return swaps can provide financing flexibility and access to hard-currency liquidity.
• The International Monetary Fund has similarly raised concerns about the growing use of complex and relatively opaque derivative financing by sovereign borrowers, including Nigeria.
• Certified Financial Education Instructor Kalu Aja argued in a June analysis that the transaction could add to Nigeria’s debt pressures if its terms are not publicly disclosed, downside scenarios are not adequately planned for and the use of the proceeds is not closely monitored.
• More recently, analyst Akinola Ezekiel Morakinyo questioned the rationale and risks surrounding the swap despite Nigeria’s foreign reserves rising to about $54.6 billion.

The concerns have kept attention on the structure of the financing and its potential implications for Nigeria’s borrowing and debt-management strategy.

Nigeria’s public debt hits N166.79 trillion

The debate over the swap comes as Nigeria’s debt stock has continued to rise. Nairametrics research shows that the country’s external debt increased by about $11.4 billion between the beginning of President Bola Tinubu’s administration and June 2026, rising to approximately $54.5 billion from about $43.1 billion.

• Domestic debt increased from about N59.1 trillion to N91.5 trillion over the period, driven partly by the securitisation of Ways and Means advances and increased issuance of government securities, including Treasury Bills.
• Nigeria’s total public debt stood at N166.79 trillion as of June 30, 2026.
• The figure comprised about N91.59 trillion in domestic debt and N75.20 trillion in external obligations.

The rising debt stock has increased attention on the government’s borrowing strategy and the cost and structure of new financing, particularly as it seeks to refinance expensive obligations while managing debt-service pressures.