The International Monetary Fund has urged Nigerian authorities to carefully assess the proposed $5 billion financing arrangement with First Abu Dhabi Bank, warning that such deals may come with hidden financial and operational risks.
During a briefing on the IMF’s latest assessment of Nigeria’s economy, the Fund’s Resident Representative, Christian Ebeke, noted that Total Return Swap agreements are often complex and can lack sufficient transparency.
“We say in the report, and our view is that the transaction and 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.”
The caution comes after lawmakers approved the Federal Government’s plan to raise up to $5 billion through the financing structure reportedly linked to the Abu Dhabi-based lender.
Ebeke explained that beyond transparency concerns, such arrangements could leave countries vulnerable to additional costs if market conditions change unfavourably.
“They also carry risk, as we flag in the report, the margin calls in the case that the value of the asset drops or the currency depreciates.”
He pointed out that Nigeria may not need to rely heavily on such instruments because it still has access to other borrowing options, including international bond markets and concessional loans.
“We think that Nigeria has market access. Nigeria can issue Eurobonds to finance the deficit. And we also think that there are other avenues for Nigeria to raise funds, including on concessional terms.”
Although the IMF said it had not reviewed the full details of the transaction, it advised the government to remain vigilant about any potential exposure.
“At this point, we don’t have any further information on the TRS. But our view is that it carries risk, and it’s important to monitor those risks very, very carefully.”
Despite its concerns over the deal, the Fund commended recent economic reforms, saying they have improved Nigeria’s ability to withstand external economic shocks.
IMF Mission Chief for Nigeria, Axel Schimmelpfennig, said policy changes implemented over the last three years have strengthened the country’s economic outlook.
“One of the key messages from the report is that strong reforms over the past three years have improved macroeconomic outcomes and improved resilience.”
The IMF expects Nigeria’s economy to continue expanding, though at a slower pace than earlier projected because of global uncertainties linked to tensions in the Middle East.
“For 2026, we project real GDP growth to be 4.1 per cent. And for 2027, we see some acceleration to 4.3 per cent.”
The Fund also encouraged the government to sustain reforms, improve revenue generation, and expand social support programmes to protect vulnerable citizens while maintaining economic stability.
