FG paid $22.5m in charges on its $1.5bn UAE loan in Q2 2026, raising fresh concerns about the cost and risks of the controversial deal.
FG pays $22.5m on controversial UAE loan
The Federal Government paid $22.5m in charges on its controversial $1.5bn UAE loan in the second quarter of 2026. New figures from the Debt Management Office (DMO) showed the payment.
The charge represents 1.5 per cent of the amount Nigeria has drawn from its $5bn financing programme with First Abu Dhabi Bank (FAB). The DMO classified the full payment as “other charges”. It recorded no principal or interest payment on the facility during the quarter.
However, the agency did not explain what the charge covered. The payment could include arrangement, commitment, transaction or other fees linked to the Total Return Swap.
Nigeria has $3.37bn exposure to FAB
Nigeria approved the $5bn Total Return Swap programme with FAB earlier this year. The government received its first $1.5bn drawdown in June, leaving $3.5bn available under the programme.
The DMO said Nigeria provided naira-denominated Federal Government securities as collateral. It also rejected claims that the government pledged crude oil, airports, ports or other strategic assets.
Under the deal, Nigeria could provide collateral worth up to 133.3 per cent of the amount drawn. Therefore, the $1.5bn drawdown could require securities worth about $2bn, depending on valuation.
Nigeria also owes FAB $1.87bn through an existing syndicated facility. The government paid $33.38m in interest on that facility during the quarter. Combined, both facilities put Nigeria’s exposure to FAB at about $3.37bn.
Swap accounts for over half of external charges
The DMO reported $39.25m in “other charges” across Nigeria’s external debt portfolio between April and June. The FAB swap alone accounted for about 57.3 per cent of that amount.
Commercial creditors recorded $32.85m in other charges during the quarter. As a result, the FAB swap accounted for about 68.5 per cent of miscellaneous charges linked to Nigeria’s commercial external borrowing.
The deal also carries a six-year tenor, with a break option after three years. Nigeria priced its first drawdown at SOFR plus 395 basis points. Future tranches could attract spreads of about 400 basis points.
IMF, Fitch flag risks
The controversial deal has attracted concerns from international financial institutions. The International Monetary Fund warned Nigeria about the risks linked to Total Return Swaps.
Former IMF Resident Representative for Nigeria, Christian Ebeke, described the structures as potentially opaque.
“We say in the report, and these types of structures carry risks. Usually, they are opaque,” Ebeke said.
He also warned that Nigeria could face margin calls if asset values fall or the naira depreciates.
Fitch Ratings similarly warned about possible debt-management, liquidity and transparency risks. Despite these concerns, the DMO defended the transaction as an alternative funding source.
The agency said safeguards would help Nigeria manage exchange rate, interest rate, collateral and refinancing risks.
