Fitch Ratings has warned that Nigeria's proposed $5 billion Total Return Swap (TRS) could expose the country to significant debt management, liquidity, and future debt restructuring risks. The warning was included in Fitch's latest special report, "Sovereign Total Return Swaps and Repo Transactions: Q&A 2026," which noted that while TRS transactions can provide sovereigns with alternative funding and diversify financing sources, their complexity may obscure the full extent of government obligations. Nigeria's proposed transaction with First Abu Dhabi Bank involves using local currency government bonds as collateral to obtain hard currency liquidity. Fitch said the transaction appears driven mainly by Nigeria's efforts to diversify funding sources and manage liquidity, rather than an inability to access conventional international capital markets, and identified transparency, liquidity management, and creditor relations as key concerns.
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