Post by James Lambie (@Jimbob)

Nigeria doesn't have a debt problem. It has a debt-counting problem. And the IMF just stopped playing along.

Nigeria just got a series of credit rating upgrades. Nigeria can now borrow on the open bond market at rates comparable to a controversial $5bn deal with a Gulf bank. So why is Nigeria still doing the deal?

That's the question sitting underneath a story the FT broke this week, and it's one worth more attention than it's getting.

Here's the mechanics, stripped of the jargon: Nigeria has arranged a $5bn credit line with First Abu Dhabi Bank through something called a "total return swap." In plain terms, Nigeria hands over naira-denominated bonds as collateral - $1.33 of bonds for every $1 it borrows - and gets cash in return. It looks like a loan. It smells like a loan. But for years, governments have not had to count this kind of collateral as debt on their books, because technically the bonds are just "frozen," not sold.

The IMF has now said: not on our watch. It's going to count the full $6.7bn in pledged bonds as Nigerian debt, full stop. And the Fund isn't alone - Moody's and Fitch are both now flagging these swaps as a distinct ratings risk, separate from ordinary borrowing, because of what happens when things go wrong. If Nigeria's rating drops, or if the bonds used as collateral fall in value, the bank can issue a margin call - demanding cash, right when Nigeria would least be able to find it. Senegal has a similar arrangement with the same bank, where a single-notch downgrade can trigger early repayment. Bondholders didn't even know these terms existed until the FT dug them up.

So here's the uncomfortable question: if Nigeria has genuinely earned its way back to cheaper, more transparent borrowing — why route billions through a structure that a debt manager at T Rowe Price calls part of an industry-wide "Darwinian adaptation" to dodge scrutiny?

A few possible answers, none of them mutually exclusive:
- It's cheaper on the coupon, even if riskier structurally, and someone in Abuja is optimising for the headline rate.
- It's being used to quietly retire older, even more expensive crude-backed loans - a real fix wrapped in an opaque wrapper.
- Nobody outside a small circle at the Debt Management Office fully understands the downside risk they've signed up to, because - as one emerging markets manager put it bluntly - "we are still in the dark."

That last one should worry every Nigerian, at home or abroad, who has any stake in how this country manages its money. Debt transparency isn't an abstract technocratic issue. It's the difference between citizens knowing what their government has actually mortgaged against the country's future, and finding out only when a margin call forces an emergency and someone has to explain, after the fact, why the real number was always bigger than the one in the budget speech.

Genuine question for anyone who follows Nigerian fiscal policy more closely than I do: is this smart, sophisticated balance-sheet management by people who know exactly what they're doing - or is it exactly the kind of "opaque borrowing" that comes back to bite the next administration?

(Full FT reporting linked below, worth your ten minutes.)
https://www.ft.com/content/cf4d7747-342a-41c5-bc4d-5c9bb7e8b4af?syn-25a6b1a6=1

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