Understood Early, Not Late
The Interest Rate Swap Executed While Everyone Else Was Trying to Log In
The Rate That Felt Like a Gift
Financial risk is often understood too late. Over nearly two decades of originating and structuring FX, rates, and derivatives, I’ve often found that to be true.
Some clients see the risk before it becomes obvious to others. Those moments are worth writing down.
March 2020 was one of those moments. Lockdown had just taken hold, dealing rooms had emptied into home offices overnight, and treasury teams were trying to keep pace with markets moving faster than many had ever seen. Conversations across Nigeria, wider Africa, Dubai, London, and New York were all narrowing to the same urgent question: how do we stay responsive when conditions are changing this quickly?
Amid that chaos, the pandemic shock sent short-term rates sharply lower, and central banks moved to support a system already in freefall. For a corporate carrying floating-rate debt, the initial effect could look like a windfall, but it was also a reminder that a sudden repricing is not the same thing as a new equilibrium.
Most treasury teams do what is natural in that moment; they take the saving and move on. Few escalate a problem that is currently making them money.
One client did something different. A group treasurer at a global multinational with Africa-linked operations, carrying a five-year floating-interest rate loan facility of roughly US$600 million, asked a better question: what happens when the cycle turns, and how long do we have before it does?
That question is the heart of this edition.
Reading the Distortion, Not the Snapshot
A sub-one-percent reference rate is rarely the point of arrival. USD LIBOR, the benchmark most of these facilities were priced against, fell just as sharply. More often, it reflects the shock of a crisis – in this case, a global pandemic – and shocks, by definition, do not last forever.
A five-year loan facility should be viewed through a cycle, not a single print. The relevant question is not only what the rate is today, but what the exposure costs across a full market cycle, and how much protection may cost once the market has already repriced the risk.
That is where many corporates get caught. They treat interest-rate risk as something to deal with once it starts affecting the P&L, much as many treat FX risk only after the currency has already moved against them. By then, the cost of protection has usually risen, because the market has reached the same conclusion at the same time.
The treasurer’s insight was simple: the cheapest time to fix a floating exposure is rarely when fixing it feels urgent. It is usually when the market still looks calm enough for the decision to be questioned.
I led the structuring of a five-year interest rate swap to convert the facility from floating to fixed, on a notional of roughly US$600 million, executed in tranches. The result was not a view on one day’s rate print, but a clearer and more governable cost base for the years ahead.
The Conversation That Didn’t Stop
The treasurer did not arrive at that conviction in one call, and he did not act immediately. Rates moved, paused, and moved again. In that kind of environment, every treasury team can find a reason to wait one more quarter. That is what makes the decision difficult. Indecision rarely looks like negligence. It usually looks like prudence.
A large part of the work was not just originating the idea, but keeping the conversation alive with my clients long enough for action to remain possible.
Treasury teams under pressure often focus on the rate today because it is concrete, quotable, and easy to defend. The harder question is what the facility costs across a full cycle, and what happens if they wait.
That is the price trap: the temptation to measure an exposure by the number in front of you today, rather than by the risk embedded in the structure over time.
The gap between understanding an exposure and acting on it is rarely closed in a single meeting. It is closed by staying close enough to the client, the balance sheet, and the market to execute when conviction and conditions finally align.
Why the Notional Was Never Done in One Line
Conviction about direction is not certainty about timing.
Executing the full notional in one trade would have concentrated the outcome on a single day’s pricing. Instead, the swap was built in tranches and executed progressively. That approach allowed the client to act on a defined view without making the entire outcome dependent on one execution point.
Tranching is not indecision. It is disciplined execution under uncertainty.
It says, in effect: we have a view, we understand the exposure, and we will manage timing risk rather than pretend it does not exist. For boards and lenders, that distinction matters. A one-off outcome can look like luck. A staged process looks like governance.
What This Means for Africa
For a group treasurer managing exposure across Lagos, Nairobi, or Johannesburg, rate risk and FX risk are rarely isolated from one another. They often sit on the same balance sheet, and in volatile periods they tend to reinforce each other.
A move in global rates can influence offshore funding costs, dollar liquidity, and the pricing of FX cover for African subsidiaries. It does not change everything at once, but it can quietly reshape the cost of capital and the cost of protection at the same time.
Fixing the rate did not eliminate the other risks. It did, however, remove one moving part from a balance sheet already dealing with currency mismatch, funding pressure, and liquidity sensitivity. When conditions later tightened further, that facility was no longer one more variable to manage. It was known, governed, and off the table.
That is what structural preparedness looks like: not predicting every move but reducing the number of exposures that still need active debate when the market shifts.
The Mirror in Today’s Market
The discipline is the same in every cycle, even when the direction is different.
Today’s market may be telling a different story, but the lesson remains familiar: once markets spend long enough at a level, people start treating that level as normal. That is when complacency becomes expensive.
For a treasurer carrying floating exposure, the real question is not whether today’s rate looks acceptable. It is whether the current level is temporary, transitional, or the beginning of a broader repricing. The businesses that are prepared a year from now will be the ones asking that question now, not after the next policy announcement forces it onto the agenda.
Doctrine · Edition 11
Financial risk is often understood too late – except when a leader acts while the market is still calm enough to make action look unnecessary.
The discipline is not to predict every turn. It is to recognise a temporary distortion for what it is, and to build a process that can respond before the market reaches the same conclusion.
Most treasury conversations never get there because they stay in the price trap. They ask what the rate is today, when the more important question is what the exposure costs across the cycle.
What the markets taught me: The best hedging decisions rarely feel urgent when they are made. If a decision only feels necessary after the market has already moved, the cheap window is probably gone. Tranching does not remove conviction; it reduces fragility in execution.
A question for leaders: Where on your balance sheet is a rate, cost, or exposure quietly working in your favour without anyone asking how long it will last? If the conversation is still about today’s price rather than the cost across the cycle, the price trap is already doing its work.
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Lessons from the Markets is a bi-weekly reflection on financial risk, leadership judgment, and decision-making under uncertainty, drawn from nearly two decades advising FX, rates, and commodities solutions for corporates with Africa-linked exposures across Africa, the UK, and wider EMEA.
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Inetina Ebitonmor
Global Markets · Corporate Treasury · Advisory | 20 Years in FX, Rates & Derivatives across EMEA & Africa
Author, Lessons from the Markets
Composite reflections drawn from multiple real market experiences; not referring to any specific client, transaction, or institution
