Nigeria draws first tranche of $5bn UAE swap facility as Tinubu seeks cheaper funding
The drawdown comes months after the National Assembly approved the Federal Government’s request to raise up to $5 billion through a structured Total Return Swap (TRS) arrangement with the Abu Dhabi lender, one of the largest banks in the United Arab Emirates.
The drawdown comes months after the National Assembly approved the Federal Government’s request to raise up to $5 billion through a structured Total Return Swap (TRS) arrangement with the Abu Dhabi lender, one of the largest banks in the United Arab Emirates.
The facility forms part of a broader external borrowing programme aimed at supporting the 2026 budget and easing pressure on public finances.
According to Bloomberg, the transaction is designed to provide Nigeria with access to dollar funding at potentially lower costs than conventional international borrowing, at a time when geopolitical tensions and higher global interest rates have increased financing costs for emerging and frontier markets.
The Tinubu administration has argued that proceeds from the facility will be deployed toward priority infrastructure projects, budget execution and the refinancing of relatively expensive domestic and external obligations. Officials believe the arrangement could help reduce debt-service costs while broadening the government’s financing options.
However, the financing structure has attracted scrutiny from multilateral institutions and market observers. The International Monetary Fund (IMF) recently cautioned Nigeria against excessive reliance on derivative-based funding arrangements, warning that such instruments are often complex and lack transparency.
Christian Ebeke, the IMF’s resident representative in Nigeria, said transactions of this nature could expose countries to hidden financial risks and make it difficult to assess the full cost of borrowing.
The Fund suggested that Nigeria could explore alternative financing options, including Eurobond issuances and concessional loans, which are generally more transparent.
The Senate approved the swap arrangement in April alongside other components of the government’s external borrowing plan.
At the time, President Tinubu informed lawmakers that Nigeria’s public debt stock stood at about $110.3 billion as of December 2025 and acknowledged that the new financing would add to the country’s debt burden.
Despite concerns, the government maintains that the swap facility offers a practical route to securing foreign capital in a challenging global environment.
The successful drawdown of the first tranche is expected to test investor confidence in the structure and could determine whether Nigeria proceeds with the remaining portions of the $5 billion programme.
