As borrowing costs remain elevated and investor appetite for frontier-market debt remains uneven, a growing number of African governments are turning to an alternative financing tool to raise hard currency without issuing Eurobonds.
According to a new Fitch Ratings report, Angola, Nigeria and Senegal have collectively used or announced plans to use more than $9 billion worth of Total Return Swap (TRS) transactions, a little-known financing structure that is emerging as an alternative source of dollar funding.
The trend reflects a broader challenge facing African sovereigns. While many governments continue to face large financing needs and external debt obligations, issuing Eurobonds has become increasingly expensive amid high global interest rates and tighter financial conditions.
TRS transactions offer another route.
Legally structured as derivatives, TRS arrangements can function much like collateralised loans. Governments pledge assets—typically sovereign bonds—in exchange for hard-currency financing from banks or other counterparties.
According to Fitch, the appeal
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