African sovereign nations like Nigeria are increasingly relying on total return swaps (TRS) to secure foreign-currency liquidity as Eurobond yields remain high.

This financial tool allows countries to access liquidity without taking on direct debt, but it has raised concerns among the International Monetary Fund (IMF) and major rating agencies.The IMF and agencies worry about hidden costs, lack of transparency, and the risk of destabilizing margin calls if markets fluctuate.TRS involves exchanging cash flows based on a reference rate, with one party paying a fixed rate and the other receiving a floating rate.While this helps countries manage liquidity, critics argue it could lead to financial instability if not properly regulated.

The trend highlights Africa's growing reliance on complex financial instruments to navigate economic challenges, despite the potential risks involved.