The International Monetary Fund (IMF) has discouraged Nigeria from proceeding with a proposed $5 billion financing arrangement with First Abu Dhabi Bank of the United Arab Emirates, warning that the deal could expose the country to financial and transparency risks.
Christian Ebeke, the IMF resident representative in Nigeria, said the planned transaction, structured as a derivatives-based financing instrument, belongs to a category of deals that are often complex and opaque. Speaking to journalists on Tuesday, Ebeke said the IMF's assessment of similar transactions in other countries showed that their terms were not always transparent, making it difficult to properly evaluate the risks involved.
“Our view is that transactions in these types of structures carry risks. Usually they are opaque, so the terms are not always very transparent when we review these instruments across countries,” he said.
The IMF official urged Nigeria to explore alternative sources of financing, including Eurobond issuances and concessional loans, rather than relying on complex derivative-backed arrangements.
The warning follows the National Assembly’s approval of President Bola Tinubu’s request to secure $6 billion in external borrowing to support government spending and infrastructure development. As part of the package, Tinubu sought approval for a structured total return swap (TRS) financing programme of up to $5 billion from First Abu Dhabi Bank.
The president said the proceeds would be used to implement the 2026 budget, fund priority infrastructure projects and refinance existing domestic and external debts. Tinubu also noted that the proposed borrowing would add to Nigeria’s public debt stock, which stood at $110.3 billion, or about N159.2 trillion, at the end of December 2025.
IMF Raises Concerns Over Complex Financing Structure
The IMF's warning highlights the potential pitfalls of derivative-based financing, which can obscure the true cost and risk profile of such deals. Ebeke emphasized that transparency is crucial for proper risk assessment, and that Nigeria should carefully weigh the implications before proceeding.
Alternative Financing Options Suggested
Ebeke recommended that Nigeria consider more transparent funding mechanisms, such as Eurobonds or loans from multilateral institutions, which typically have clearer terms and lower risks. These alternatives could provide the necessary funds without the opacity associated with the proposed swap arrangement.
The IMF's advice comes at a time when Nigeria is grappling with high public debt and the need for sustainable financing to support economic growth and infrastructure development.
