First Abu Dhabi Bank (FAB), the United Arab Emirates’ largest lender, is looking to sell down part of its $5 billion total-return swap with Nigeria, Bloomberg reported.
The bank remains committed to the transaction but is open to syndicating its position if there is market appetite, Bloomberg quoted its sources as saying.
Under such an arrangement, FAB would likely remain Nigeria’s counterparty while earning additional fees from banks who take a slice of its holding.
Nigeria joined other African countries including Angola and Senegal in using the complex instrument to diversify its sources of financing. It drew $1.5 billion in the first tranche of the loan in June.
Africa’s biggest oil producer is providing collateral equivalent to 133% of the loan in naira-denominated securities for the transaction, and will use the proceeds for government spending and refinancing pricier debt.
The International Monetary Fund and credit rating companies have reservations about total-return swaps, which critics say lack transparency and could complicate debt restructurings.
Follow the MoneyCentral Nigeria channel on WhatsApp: Click here!
