The International Monetary Fund (IMF) has warned Nigeria that its planned $5bn (approximately N7tn) financing deal with First Abu Dhabi Bank carries transparency and refinancing risks, saying derivative-based transactions are often opaque and complex.
“Our view is that the transaction in these types of structures carry risks. Usually they are opaque so the terms are not always very transparent when we reviewed these instruments across countries,” Christian Ebeke, IMF Mission Chief for Nigeria, told reporters on Tuesday.
He said Nigeria could instead issue Eurobonds or seek concessional financing as more transparent and stable alternatives.
Nigeria’s Senate approved the total return swap agreement with the UAE lender in April, joining other African borrowers, including Senegal and Angola, that have tapped similar arrangements over the past year.
The deal would allow Nigeria to raise funds through a structured financing arrangement rather than a conventional sovereign bond issuance. The Federal Government intends to use the proceeds to refinance costly debt and fund infrastructure projects.
The warning came alongside the IMF’s 2026 Article IV Consultation Report on Nigeria, in which the Fund praised the sweeping reforms undertaken by President Bola Tinubu since 2023, including the removal of fuel subsidies, exchange rate liberalisation and tighter monetary policy.
According to the IMF, the reforms have helped rebuild economic buffers, restore investor confidence and improve Nigeria’s access to international capital markets. The Central Bank of Nigeria’s gross reserves now stand at $50bn, their highest level in 17 years.
However, the Fund cautioned that the gains had yet to translate into meaningful improvements in living conditions for many Nigerians.
“Conditions remain difficult for many Nigerians, with poverty and food insecurity likely to worsen in the current external environment,” the IMF Executive Board stated.
The Fund said poverty currently affects 63 per cent of the population, while an estimated 27 million people face food insecurity. It added that rising global fuel, food and fertiliser prices, partly linked to the ongoing Middle East conflict, were worsening economic hardship despite stronger headline economic indicators.
The IMF also warned that Nigeria’s reliance on volatile foreign portfolio investment poses rollover risks and urged policymakers to attract more stable, long-term capital, particularly foreign direct investment.
(The Whistler)
