ABUJA, April 3 – Nigeria is planning to raise up to $5 billion through a structured financing deal with First Abu Dhabi Bank, as elevated global borrowing costs continue to limit access to traditional debt markets.
According to documents submitted to the National Assembly, the government intends to secure the funding through a total return swap (TRS), a derivatives-based arrangement that allows it to access liquidity while deferring immediate fiscal pressure.
The move comes at a time when Eurobond issuance by emerging markets has slowed sharply, with borrowing costs rising since the outbreak of the Iran conflict in February.
As a result, several African countries, including Senegal and Angola, have turned to alternative financing structures over the past year.
Proceeds from the facility are expected to be deployed toward infrastructure development and the refinancing of higher-cost domestic and external debt. The loan will be drawn in tranches and carries a six-year tenor, including a three-year break clause.
Under the terms outlined, the facility will be backed by naira-denominated securities valued at up to 33.3% above the loan size.
Pricing for the first tranche is set at SOFR plus 3.95%, rising slightly to 4% for subsequent tranches, levels the government considers competitive when compared with current Eurobond yields.
However, the structure includes downside risk as Nigeria will be required to make dollar payments if the value of the underlying collateral declines due to market or foreign exchange movements. Conversely, any excess value in the collateral will be returned to the government.
Market participants say instruments such as total return swaps and private placements are likely to gain traction if global volatility continues to weigh on conventional borrowing channels.
