Nigeria raises N7.62 trillion in bonds and utilizes US$5 billion swap facility

Nigeria has raised N7.62 trillion through Federal Government of Nigeria (FGN) bonds via eight primary market auctions since the beginning of the year. This local debt market activity has been a significant factor in financing the government’s budget deficit, which is approximately N31.5 trillion.

In addition to local bond issuances, Nigeria has utilized a US$5 billion total return swap facility from First Abu Dhabi Bank. Approximately US$1.5 billion of this facility has been drawn. The arrangement involves Nigeria pledging naira bonds worth roughly 133% of the cash received in exchange for dollars, while paying a floating dollar interest rate. Under the terms, if the value of the pledged bonds decreases, Nigeria is required to provide additional collateral.

The IMF has advised against this arrangement and currently includes the collateral in Nigeria’s public debt calculations. While the Senate approved the facility, specific details such as the term sheet and margin-call triggers have not been made public.