Nigeria’s $5 billion swap: What it is, what it costs, and what Abuja isn’t saying

BusinessDay carried a story on August 24 raising fresh questions about the $5 billion Total Return Swap (TRS) the National Assembly approved on March 31, 2026 — a facility now being drawn in tranches.

The paper quoted Dele Oye, chairman of the Alliance for Economic Research and Ethics Ltd/GTE, saying the government needs to be far more transparent about the terms of the deal and how the proceeds are being spent.

As of now, Abuja still hasn’t published a term sheet or a breakdown of how the money will be used, even though the first tranche — $1.5 billion — was drawn back in late June.

Based on the documents submitted to the National Assembly, here is how this swap actually works, what risks Nigeria is carrying, and what could still go right.

The government has entered into the swap with First Abu Dhabi Bank (FAB) for up to $5 billion, disbursed in tranches as cash is needed — a sensible choice, since it avoids paying financing costs on money sitting idle. The facility is backed by naira-denominated Federal Government bonds issued specifically for this purpose and pledged to FAB as collateral, valued at roughly 133 percent of whatever is drawn: for every $100 Nigeria borrows, it pledges about $133 in bonds as security.

Nigeria pays interest at the Secured Overnight Financing Rate (SOFR) — the benchmark rate for overnight dollar borrowing that replaced LIBOR — plus a credit spread of 395 basis points on the first tranche, rising to 400 on later ones. What hasn’t been disclosed anywhere — not in the parliamentary paperwork, not on the Debt Management Office’s bond pages, not in any ministerial briefing — is the coupon rate on the bonds pledged as collateral. That is a real, still-open gap.

Bloomberg reported that Nigeria drew the first tranche of $1.5 billion in late June, priced at SOFR plus…