Ex-World Bank Chief Warns Nigeria’s Collateral-Backed Loans Could Complicate Debt Restructuring

Former World Bank president David Malpass has warned that Nigeria’s growing use of collateral-backed borrowing could make any future debt restructuring more difficult. He said such deals can create a “race toward seniority” among creditors, complicating debt workouts if financial conditions worsen. The warning follows Nigeria’s reported $1.5 billion drawdown from a $5 billion facility arranged with First Abu Dhabi Bank. Under the arrangement, the Federal Government reportedly pledges securities worth about 133 percent of each amount drawn to secure dollar liquidity without issuing Eurobonds at high market rates. The IMF and Fitch Ratings have also raised concerns that derivative-based financing could reduce transparency and create liabilities not fully captured by standard debt figures. Malpass argued that sustained reforms in exchange-rate management, oil, taxation and agriculture could still unlock Nigeria’s long-term growth potential.

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