The Financial Times asked whether African governments understand total return swaps. In the same article it described Colombia's larger swap as a carry trade and asked nothing of Colombia. 1
The question sits in one sentence of the report by Joseph Cotterill, published 10 April 2026. 1
other creditors are worried whether governments understand what they are signing up for.
Financial Times, 10 April 2026
What Nigeria, Angola and Senegal signed
Nigeria said it will borrow $5bn from First Abu Dhabi Bank under a total return swap. The FT puts that at the equivalent of a tenth of this year's budget. 1
The bank advances cash. Nigeria gives it naira government bonds as collateral worth up to 133.3 per cent of the amount drawn. 1
Nigeria pays 4 per cent over a floating US dollar rate, currently 3.6 per cent. Its international bonds yield between 6 and 8.5 per cent. 1
If the naira bonds fall in value, margin calls must be paid in cash in US dollars. Yvette Babb of William Blair names naira depreciation and rate rises to fight inflation as the risks. 1
The request went to parliament and was approved the same day. 1
Angola expanded its JPMorgan swap from $1bn to $1.5bn, backed by $2bn in international bonds and $300mn in US Treasury bills. It drew another $1bn from Africa Finance Corporation against $1.4bn in local bonds and US debt. 1
Angola has already taken one $200mn margin call. It has disclosed that if it could not repay the $2.5bn drawn so far, the bill in its debt figures would be $5.8bn. 1
Senegal disclosed $1.3bn across seven swaps last year, after the FT revealed details of two of them with Africa Finance Corporation and First Abu Dhabi Bank, worth €650mn. Finance minister Cheikh Diba says it paid 7 per cent against double-digit costs on international bonds, a saving of about $64mn. 1
Who holds the tail
Nigeria and Angola count the cash borrowed as external debt and leave the collateral out while lenders do not have to touch it. In a default the collateral is added to the debt stock, just as restructuring talks begin. 1
Lee Buchheit, the sovereign debt lawyer, puts the bet on the lender's side of the table. 1
What is really going on here is that the swap counterparties are betting that if a full restructuring begins, the debtor country's domestic debt will either be excluded altogether from the 'perimeter' of the debt restructuring or, at the very least, be given a significantly softer treatment.
Lee Buchheit, sovereign debt lawyer
Buchheit adds that the assumption may prove fragile. Domestic bonds are usually spared in African workouts because local banks and pension funds hold them. Bonds manufactured and lodged with a foreign institution as security raise no such concern. 1
Bondholders have little recourse. Negative pledges usually cover public external indebtedness, and lawyers told the FT that derivatives do not count. Investors want guidance from the IMF and the Paris Club on how to classify these swaps. 1
That is a hard look at a bad structure, and it is the right story. A parliament that approves a $5bn swap in a day has a governance failure. A borrower that posts collateral worth more than the loan and takes cash margin calls carries real risk. The risk reporting stands on its own evidence.
Colombia gets a strategy
The article gives Colombia one paragraph. Colombia used a $9.3bn swap to reach lower Swiss franc interest rates, pledging its bonds and US Treasuries as collateral. 1
That is nearly twice the size of Nigeria's deal, on the same collateral logic. Thierry Larose of Vontobel calls it more like a carry trade to profit from currency moves, set against deals such as Senegal's that seem more about access to financing. 1
A carry trade is a currency bet. The FT quotes no one asking whether Colombia understands what it is signing up for, and none of its sources is asked whether Bogotá grasps currency risk. 1
The instrument is the same. The collateral is the same. The size runs the other way. The one difference left on the page is where the borrower sits, and I read that gap as a racial double standard.
African finance ministries can be wrong about price, collateral and who holds the tail. So can every other treasury. The FT put the competence question to one set of them.
