Nigerian govt denies pledging oil revenue, airports for $5bn FAB facility

THE Federal Government has clarified that Nigeria did not use oil revenues, airports, seaports or other strategic national assets as collateral for its $5 billion financing arrangement with First Abu Dhabi Bank (FAB).

The Debt Management Office (DMO), in a frequently asked questions document issued on August 27, said the collateral for the Total Return Swap (TRS) facility comprises only naira-denominated Federal Government bonds.

The clarification followed growing concerns over the assets backing the dollar liquidity arrangement and whether key government revenue streams or national infrastructure had been committed to the lender.

According to the DMO, the securities pledged under the transaction are domestic instruments that remain within the government’s fiscal and monetary policy framework.

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“No oil revenues or strategic assets, such as ports or airports, are pledged,” the debt office said.

Under the structure, Nigeria provides Federal Government bonds to FAB in exchange for access to US dollar liquidity. Interest on the facility is linked to the Secured Overnight Financing Rate (SOFR), plus an agreed margin.

The facility has a maximum value of $5 billion and a six-year tenor, with a three-year break clause.

The DMO said the collateral requirement is 133.3 percent of the amount drawn, meaning Nigeria provides securities worth roughly one-third more than the dollar liquidity it receives.

The debt office said the arrangement provides a collateral buffer before additional margin requirements could arise, adding that some comparable sovereign transactions have involved collateralisation of as much as 166.67 percent.

It described Nigeria’s 133.3 percent requirement as favourable relative to those transactions.

The first tranche of the facility carries pricing of SOFR plus 3.95 percentage points, while subsequent tranches are priced at SOFR plus 4 percentage points.

DMO highlights alternative dollar funding channel

The debt office said the TRS arrangement gives Nigeria an additional avenue for raising foreign currency liquidity, particularly when international capital markets become volatile or the cost of issuing Eurobonds rises.

“It gives Nigeria faster access to dollar liquidity and remains available during periods of market volatility, when Eurobond markets can become more expensive or constrained,” the DMO said.

It added that the transaction would broaden the government’s funding base and reduce its dependence on any single source of financing.

Unlike a conventional Eurobond, under which Nigeria raises funds through an international debt issuance, the TRS enables the government to obtain dollar liquidity against pledged domestic securities.

The DMO said the proceeds could be deployed toward implementation of the federal budget, priority infrastructure projects, refinancing of more expensive domestic and external obligations, and other urgent expenditures approved by President Bola Tinubu.

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President Tinubu had in March sought the National Assembly’s approval for up to $5 billion in structured financing from FAB.

The president said the facility would be drawn in tranches and support budget implementation, critical infrastructure and the refinancing of relatively expensive domestic and external debt.

The latest DMO explanation is intended to provide greater clarity on the structure of the transaction and address concerns over the nature of the assets pledged as security.