Global credit rating agency Fitch Ratings has cautioned Nigeria over potential risks associated with a proposed $5 billion swap arrangement, citing concerns about fiscal sustainability and debt management.

The agency noted that while such transactions can provide short-term financial relief and liquidity support, they may also expose the country to additional financial obligations and market-related risks.

According to Fitch, the long-term impact of the arrangement will depend on its structure, transparency, and the government’s ability to manage associated liabilities effectively.

Analysts say swap deals are often used by governments to improve cash flow, support foreign exchange reserves, or refinance existing obligations, but they require careful implementation to avoid future fiscal pressure.

The rating agency stressed the importance of maintaining prudent debt management practices and ensuring that any financing arrangement aligns with broader economic reform objectives.

Economic experts noted that Nigeria continues to face challenges relating to revenue generation, foreign exchange stability, and debt servicing costs.

They argued that while innovative financing mechanisms can support economic goals, strong oversight and accountability remain critical to minimizing risks.

The development comes as policymakers pursue measures aimed at strengthening public finances and supporting economic growth.

Market observers will be closely monitoring how the proposed arrangement is structured and its implications for Nigeria’s credit outlook.

Fitch reaffirmed the need for sustainable fiscal reforms to enhance investor confidence and improve the country’s long-term economic prospects.