UAE's FAB Weighs Syndicating Nigeria's $5bn Swap Exposure
First Abu Dhabi Bank PJSC, the largest lender in the United Arab Emirates, is exploring a plan to spread part of its exposure to Nigeria's $5 billion total-return swap among other banks through a syndication, according to people familiar with the discussions.
The arrangement, reported on Thursday, October 1, would see FAB sell down a portion of its position if enough other lenders express interest. The people spoke on condition of anonymity because the talks are private. FAB is said to remain committed to the transaction.
Under the proposed structure, FAB would most likely stay on as Nigeria's counterparty while letting other banks assume slices of its exposure. The UAE bank could also collect extra fees from the syndication. That means FAB would not be walking away from the financing; instead, it would spread some of the financial risk to other lenders while preserving its direct relationship with Nigeria.
A total-return swap is a derivative in which one party gets financing against assets posted as collateral, while passing the economic returns and risks tied to those assets to another party. In Nigeria's case, the government has pledged naira-denominated securities valued at roughly 133% of the financing.
The Federal Government drew down $1.5 billion as the first tranche of the $5 billion facility in June. The proceeds are expected to help fund government spending and refinance more costly debt. Nigeria adopted the instrument as part of a push to widen its funding sources and cut reliance on pricier borrowing, following other African nations such as Angola and Senegal that have used similar structures.
The swap, which surfaced in March 2026, was approved by the National Assembly. The government pitched it as a way to obtain foreign-currency financing at a lower cost than some conventional borrowing options. However, the structure has drawn scrutiny over transparency and its possible effects on Nigeria's debt management.
In June, Fitch Ratings cautioned that the transaction could mask sovereign debt risks and complicate any future debt restructuring, while noting that total-return swaps can offer financing flexibility and access to hard-currency liquidity. The International Monetary Fund has also flagged concerns about the increasing use of complex and relatively opaque derivative financing by sovereign borrowers, Nigeria included.
Certified Financial Education Instructor Kalu Aja argued in a June analysis that the deal could heighten Nigeria's debt pressures if its terms are not made public, downside scenarios are not properly planned for, and the use of the proceeds is not closely watched. More recently, analyst Akinola Ezekiel Morakinyo questioned the rationale and risks of the swap even as Nigeria's foreign reserves climbed to about $54.6 billion. Those concerns have kept focus on the financing's structure and what it could mean for Nigeria's borrowing and debt-management strategy.
The debate is unfolding against a rising debt stock. Research shows Nigeria's external debt grew by about $11.4 billion between the start of President Bola Tinubu's administration and June 2026, reaching approximately $54.5 billion from about $43.1 billion. Domestic debt rose from about N59.1 trillion to N91.5 trillion over the same period, driven partly by the securitisation of Ways and Means advances and heavier issuance of government securities, including Treasury Bills.
As of June 30, 2026, Nigeria's total public debt stood at N166.79 trillion. That comprised about N91.59 trillion in domestic debt and N75.20 trillion in external obligations. The growing debt stock has sharpened attention on the government's borrowing strategy and on the cost and structure of new financing, especially as it seeks to refinance expensive obligations while managing debt-service pressures.
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