The Federal Government has paid $22.5 million in charges linked to its $1.5 billion Total Return Swap facility with First Abu Dhabi Bank, FAB, in the second quarter of 2026.
NaijaOnPoint gathered that the payment was disclosed in the latest external debt service records released by the Debt Management Office, DMO.
The records showed that the entire $22.5 million was recorded as “other charges”.
However, No principal repayment or interest payment was made on the Total Return Swap during the April-to-June period.
The latest figure has drawn attention because the payment 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 DMO did not give a detailed explanation of what the $22.5 million charge covered in its second-quarter report.
It therefore 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 FAB 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.
With the initial drawdown, $3.5 billion remains available under the approved programme.
The $1.5 billion drawn from FAB was still outstanding as of June 30, 2026, according to the DMO’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.
Under the arrangement, Nigeria obtains dollar liquidity while providing naira-denominated Federal Government securities as collateral.
The structure has attracted attention because of the size of the financing, the collateral requirements and the possible impact of movements in interest rates, exchange rates and the value of the securities backing the transaction.
The DMO had earlier clarified that Nigeria did not use crude oil revenues, airports, seaports or other strategic national assets as security for the facility.
Instead, the agency said Federal Government securities denominated in naira were used as collateral.
Under the arrangement, collateral of up to 133.3 per cent of the amount drawn could be required.
For the $1.5 billion already obtained, this could translate to securities worth about $2 billion, depending on the valuation applied to the 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, SOFR, plus 395 basis points. Subsequent drawdowns are expected to carry a spread of around 400 basis points.
Because SOFR is a floating benchmark, the cost of servicing the financing can change as US short-term interest rates move.
The $22.5 million charge formed a significant part of the miscellaneous costs recorded in Nigeria’s external debt service during the quarter.
The DMO reported total “other charges” of $39.25 million across the country’s external debt obligations between April and June.
This means the FAB Total Return Swap accounted for about 57.3 per cent of all other charges recorded during the period.
Commercial creditors accounted for $32.85 million of the total other charges. The $22.5 million FAB swap payment therefore represented about 68.5 per cent of the miscellaneous charges linked to Nigeria’s commercial external borrowing during the quarter.
Nigeria also has another major financial obligation to First Abu Dhabi Bank.
During the same quarter, the Federal Government paid $33.38 million in interest on an existing syndicated facility from FAB. A further $12,413 was recorded as other charges on that facility.
The total debt service on the syndicated facility stood at about $33.40 million during the quarter, with no principal repayment recorded.
As of June 30, Nigeria owed approximately $1.87 billion under the existing FAB syndicated facility.
When combined with the $1.5 billion Total Return Swap, the country’s outstanding exposure to First Abu Dhabi Bank stood at about $3.37 billion.
The amount represented roughly 6.2 per cent of Nigeria’s $54.52 billion external debt stock as of the end of June.
The Total Return Swap had earlier generated concerns over the risks associated with the financing structure.
In June, the International Monetary Fund cautioned the Federal Government over the proposed $5 billion arrangement with First Abu Dhabi Bank.
The warning was issued by the then IMF Resident Representative for Nigeria, Christian Ebeke, during a virtual briefing on the Fund’s 2026 Article IV Consultation Report.
Ebeke said the structure could present transparency and financial risks.
“We say in the report, and our view is that the transaction and these types of structures carry risks. Usually, they are opaque. So, the terms are not always very transparent when we review these instruments across countries,” he said.
He further pointed to the possibility of additional financial pressure if the value of assets used in the transaction falls or if exchange rate movements become unfavourable.
“They also carry risk, as we flag in the report, the margin calls in the case that the value of the asset drops or the currency depreciates,” he said.
The IMF had also indicated that Nigeria had other financing options that could provide greater transparency and less complicated funding arrangements.
The concerns were not limited to the IMF.
Fitch Ratings also raised questions about the possible debt-management and liquidity implications of the Total Return Swap.
The global rating agency acknowledged that such arrangements could give governments access to hard-currency liquidity and provide an alternative to conventional borrowing.
However, the structure could also expose borrowers to market shocks and create transparency challenges if the terms and associated risks were not properly managed.
The Federal Government and the DMO have maintained that the arrangement provides Nigeria with another avenue for accessing foreign currency financing.
The DMO has also pointed to safeguards covering exchange-rate movements, interest-rate changes, collateral valuation and refinancing 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 FAB Total Return Swap.
Atiku asked the government to explain the purpose of the payment and disclose the agreement that authorised it.
“What exactly was the $22.5m charge for? Which agreement authorised it? What was the original facility? How much was drawn? What obligations remain outstanding?” he asked.
This article first appeared on NaijaOnPoint: https://politicsnigeria.com/2026/10/04/fg-pays-22-5m-charges-on-1-5bn-uae-loan/
… FG Pays $22.5m Charges on $1.5bn UAE Loan Read More on … NaijaOnPoint.
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