Sovereign Debt News Update No. 171: Nigeria to Explore a $5 billion Total Return Swap with UAE Bank
Nigeria is once again at a critical juncture in its debt trajectory, as mounting fiscal pressures, rising borrowing costs, and constrained access to conventional financing channels push the government toward increasingly complex and opaque instruments. Recent reports indicate that Nigeria is considering a $5 billion Total Return Swap (TRS) arrangement with First Abu Dhabi Bank, marking a significant shift in its debt management strategy. This development must be situated within a broader pattern of an increasing appetite for this credit derivative in the form of Total Return Swaps. Both Angola and Senegal have in the recent past also been reported to have entered into Total Return Swaps. These developments point to a deepening reliance on financial engineering solutions that may provide short term liquidity but carry significant long-term risks for fiscal stability and public accountability.