The International Monetary Fund flagged risks in Nigeria’s $5 billion total return swap deal with First Abu Dhabi Bank in its global financial stability report released on Tuesday.
TRS can be likened to collateralised borrowing in which the Bola Tinubu administration pledged government bonds to secure foreign funding. $1.5 billion has been drawn from the $5 billion swap for equivalent naira-denominated bonds at 133 per cent.
The deal, approved by the National Assembly in March, has drawn scrutiny from the IMF over financial stability concerns that African nations are becoming overreliant on foreign funding to run their economies, pledging collateral that can be lost in a volatile market.
“Public reporting of foreign TRS remains concentrated in a limited number of emerging market and frontier economies, but disclosed cases point to growing use of these instruments of external financing and liability management.
Nigeria entered into a swap financing programme with FAB to give the African nation $5 billion and put down $133 per cent of the funds in government as collateral. This means that for every $100, Nigeria will provide $133 in government bonds as collateral.
“Nigeria approved a $5 billion TRS program in April 2026, with subsequent market reporting indicating that about $1.5 billion had been drawn,” the publication stated.
The IMF warned of liquidity risks, as FAB could demand additional collateral from Nigeria at short notice.
The monetary fund also warned that a volatile market is unreliable, as it could raise interest rate of 133 per cent to a higher figure.
“A downgrade, a rise in yields, currency depreciation, or broader risk-off can reduce collateral value and trigger margin calls or early termination, precisely when liquidity buffers are most strained,” the IMF wrote in its report.
The IMF cited Angola’s case, where a $1 billion TRS backed by $1.9 billion in collateral in December 2024 reportedly required an additional $200 million in collateral when bond prices fell in April 2025.
The market volatility placed an undue strain on the government within four months of the swap.
“This can create de facto seniority and shift the burden of debt relief onto other creditors,” the IMF warned.
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