The Federal Government of Nigeria has paid $22.5 million in charges related to its $1.5 billion Total Return Swap facility with First Abu Dhabi Bank. This payment was disclosed in the Debt Management Office's external debt service records for the second quarter of 2026. The records show that the entire $22.5 million was recorded as "other charges". No principal repayment or interest payment was made on the Total Return Swap during the April-to-June period.
The $22.5 million charge represents 1.5 per cent of the $1.5 billion already drawn from the broader $5 billion financing programme approved for the Federal Government. The Debt Management Office did not provide a detailed explanation of what the $22.5 million charge covered in its second-quarter report. It remains unclear whether the amount represented arrangement fees, transaction costs, commitment fees or other charges attached to the financing structure.
Nigeria entered into the Total Return Swap arrangement with First Abu Dhabi Bank as part of efforts to secure additional foreign currency financing for the 2026 budget and manage its financing requirements. The Federal Government was authorised to establish a programme of up to $5 billion with the UAE-based bank. The first drawdown amounted to $1.5 billion, leaving $3.5 billion available under the approved programme.
The $1.5 billion drawn from First Abu Dhabi Bank was still outstanding as of June 30, 2026, according to the Debt Management Office's external debt stock figures. The obligation was classified under "Other Commercial" debt. The Total Return Swap differs from conventional foreign borrowing such as Eurobonds, as Nigeria obtains dollar liquidity while providing naira-denominated Federal Government securities as collateral.
The structure of the Total Return Swap has attracted attention due to the size of the financing, collateral requirements and possible impact of movements in interest rates, exchange rates and the value of securities backing the transaction. The Debt Management Office clarified that Nigeria did not use crude oil revenues, airports, seaports or other strategic national assets as security for the facility. Instead, Federal Government securities denominated in naira were used as collateral.
The facility has a six-year tenor, with a break option after three years. The first drawdown was priced at the Secured Overnight Financing Rate plus 395 basis points. Subsequent drawdowns are expected to carry a spread of around 400 basis points. The $22.5 million charge formed a significant part of the miscellaneous costs recorded in Nigeria's external debt service during the quarter.
The International Monetary Fund and Fitch Ratings have raised concerns over the risks associated with the financing structure, citing transparency and financial risks. Former Vice-President Atiku Abubakar recently questioned the Federal Government over the country's rising debt and specifically demanded an explanation for the $22.5 million charge linked to the First Abu Dhabi Bank Total Return Swap.
Key points
- The Federal Government paid $22.5m in charges on a $1.5bn UAE loan in Q2 2026.
- The loan is part of a $5bn financing programme approved for the Federal Government.
- The structure of the Total Return Swap has raised concerns over transparency and financial risks.
