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The federal government says no oil revenues or strategic national assets were pledged as collateral for the $5 billion total return swap (TRS) facility with First Abu Dhabi Bank (FAB).

The Debt Management Office (DMO), in a frequently asked questions document on the facility dated August 27, said the government only pledged naira-denominated bonds.

The debt office said the collateral consists of domestic securities that Nigeria can manage through its fiscal and monetary policy tools.

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

Under the transaction, the agency said Nigeria pledged naira-denominated FGN bonds to FAB in exchange for US dollar liquidity.

The country is expected to pay interest based on the secured overnight financing rate (SOFR) plus an agreed margin.

The debt office said the facility has a maximum size of $5 billion and a tenor of six years, with a three-year break clause.

“The collateral is set at 133.3 percent of the amount drawn,” the agency said.

The DMO said the over-collateralisation means Nigeria provides securities worth about one-third more than the dollars it receives, creating a buffer before any additional margin is required.

“Comparable sovereigns have posted up to 166.67%, so Nigeria’s 133.3% reflects favourable terms,” the debt office said.

According to the document, the first tranche of the facility is priced at SOFR plus 3.95 percent, while subsequent tranches will attract an SOFR of plus 4 percent.

Speaking on the loan category, the DMO said the TRS gives Nigeria another channel for accessing dollar liquidity, particularly when international bond markets become volatile or expensive.

“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,” it said.

‘LOAN ARRANGEMENT DIVERSIFIES FGS FUNDING SOURCES’

The debt office said the arrangement also diversifies the federal government’s funding sources and reduces reliance on any single market.

Unlike a conventional Eurobond, where Nigeria would borrow directly through an international bond issuance, the TRS allows the government to access dollar liquidity against pledged securities.

The DMO noted that proceeds from the facility would be used for budget implementation, priority infrastructure, refinancing of costlier domestic and external debt, and other urgent needs approved by the president.

The clarification comes amid increasing public scrutiny of the nature of the collateral backing the dollar-denominated financing arrangement.

In March, President Bola Tinubu asked the national assembly to approve up to $5 billion structured financing from the FAB.

Tinubu said the facility would be disbursed in tranches and used for budget implementation, priority infrastructure projects and repayment of relatively expensive domestic and external debt.