Nigeria Eyes UAE’s Largest Bank for $5 billion Swap to Shield Economy from Rising Costs

Nigeria plans to borrow $5 billion from the United Arab Emirates’ largest bank using a financial tool called a derivatives deal.

The goal is to lower borrowing costs as rising global tensions, including the war in Iran, push up interest rates and make international loans more expensive.

On Tuesday, Nigeria’s lawmakers approved President Bola Tinubu’s plan for a total return swap with First Abu Dhabi Bank PJSC. The deal is part of the government’s efforts to fund its expanded 2026 budget, which is 17% larger than initially planned, according to Bloomberg.

Under the agreement, Nigeria will provide collateral worth 133.3% of the loan in naira-denominated securities. The first part of the loan will carry an interest rate 395 basis points above the Secured Overnight Financing Rate (SOFR), with later parts at SOFR plus 400 basis points.

For comparison, SOFR was 3.63% on March 30, while Nigeria’s dollar bonds due in 2034 yielded 7.97%, up from 7.3% before the recent rise in tensions in the Middle East.

A Senate committee reviewing the request described the terms as “competitive relative to prevailing eurobond yields for Nigeria.” The facility carries a six-year term, including a three-year break clause and annual rollover provisions, subject to mutual agreement.

Nigeria, Africa’s largest oil producer, will use the money to build roads and ports and refinance existing debt that is more expensive.

Africa Adopts Derivatives Deals

These types of derivative deals became well-known in 2021 when a similar deal contributed to the collapse of the investment firm Archegos Capital Management.

Nigeria joins Angola and Senegal in turning to swaps when international markets are either too expensive or inaccessible. Senegal raised 721 billion CFA francs ($1.3 billion) last year, while Angola secured $1 billion through similar instruments in 2025, according to the International Monetary Fund.