UAE’s largest bank weighs syndicating part of Nigeria’s $5bn swap

UAE’s largest lender, First Abu Dhabi Bank is considering syndicating part of its exposure to Nigeria’s $5 billion total-return swap, potentially spreading the risk of the financing among other lenders, people familiar with the matter told Bloomberg. FAB is exploring whether there is sufficient appetite from other banks to take portions of its position, according to the people, who asked not to be identified because the discussions are private. The Abu Dhabi-based lender remains committed to the transaction, they said. Under a potential arrangement, FAB would continue to serve as Nigeria’s counterparty while transferring part of the economic exposure to other lenders. The bank could also earn fees for arranging the syndication. Read also: Airtel Money prices London IPO at £1.96 as valuation falls to £5.3bn The move would allow FAB to reduce its concentration in the Nigerian transaction without fully exiting it, while potentially bringing additional international lenders into one of the country’s largest recent financing deals. Nigeria drew $1.5 billion in June from the $5 billion facility, which was approved by the National Assembly earlier this year. The government is using the proceeds to support spending and refinance more expensive obligations. The transaction is structured as a total-return swap, with Nigeria pledging naira-denominated government securities worth about 133% of the financing as collateral. The structure gives the government access to dollar liquidity without relying solely on conventional external borrowing. The deal has attracted scrutiny from investors and credit analysts over the transparency of derivative-based sovereign financing and how the obligations would be treated in a future debt restructuring. Fitch Ratings warned in June that the transaction could make Nigeria’s sovereign debt risks less transparent and potentially complicate any restructuring, while acknowledging that such swaps can provide financing flexibility and access to hard-currency liquidity. Read also: Forbes ranking puts Kenya, Egypt ahead of Africa’s banking giants The International Monetary Fund has also raised concerns about the increasing use of complex and relatively opaque derivative structures by sovereign borrowers. The scrutiny comes as Nigeria’s debt burden continues to expand. Total public debt reached N166.79 trillion as of June 30, comprising N91.59 trillion of domestic debt and N75.20 trillion of external obligations, according to figures cited by Nairametrics. Nigeria’s external debt has risen by about $11.4 billion since President Bola Tinubu took office, reaching roughly $54.5 billion in June from about $43.1 billion previously. Domestic debt increased to about N91.5 trillion from N59.1 trillion over the same period, partly reflecting the securitisation of central-bank Ways and Means advances and increased government securities issuance. The potential syndication underscores the growing role of structured financing in Nigeria’s efforts to secure foreign-currency funding as borrowing costs remain a concern and the government seeks to manage rising debt-service obligations.