Nigeria Draws $1.5bln from $5bln FAB Derivatives Facility

By Samuel Akpan

Nigeria has drawn approximately $1.5 billion from a $5 billion derivatives financing arrangement with First Abu Dhabi Bank, marking the first disbursement under a facility approved by the National Assembly in March amid fresh concerns over transparency and hidden fiscal risks.

The federal government received the funds in the past two weeks through a structured total return swap transaction with the United Arab Emirates’ largest lender, according to people familiar with the matter.

The arrangement forms part of a broader external borrowing plan that also includes facilities from the United Kingdom.

On March 31, the National Assembly approved President Bola Tinubu’s request to raise up to $6 billion in external financing.

The package included the $5 billion derivatives programme with First Abu Dhabi Bank and an additional facility from the UK.

President Tinubu had informed lawmakers that the proposed borrowing would push up Nigeria’s public debt stock, which stood at $110.3 billion, equivalent to about N159.2 trillion, as of December 31, 2025.

The drawdown has drawn scrutiny from credit rating agency Fitch, which noted that while such transactions can deliver liquidity, diversify funding sources and reduce borrowing costs, they frequently sit outside standard debt-reporting frameworks.

Fitch warned that the structure could undermine transparency and legislative oversight. It also highlighted potential foreign exchange risks for Nigeria if domestic bond yields increase or the naira comes under further pressure.

The International Monetary Fund has separately cautioned that derivative-based financing arrangements are often opaque and complex.

This complexity, the IMF said, makes it difficult for governments and the public to fully assess the true extent of debt obligations involved.

The $5 billion facility with First Abu Dhabi Bank represents the largest single component of the approved external borrowing plan.

It is designed as a total return swap, a sophisticated financial instrument that allows the government to access funds while managing certain market exposures.

The inflow provides immediate liquidity to the federal government at a time of ongoing fiscal pressures.

However, the use of derivatives financing continues to spark debate about long-term costs, accountability and the sustainability of Nigeria’s debt management strategy.