The International Monetary Fund (IMF) has advised Nigeria to reconsider a proposed $5 billion financing arrangement with First Abu Dhabi Bank of the United Arab Emirates, warning that the transaction could expose the country to financial and transparency risks.
The caution was issued by the IMF Resident Representative in Nigeria, Christian Ebeke, who described the proposed financing structure as a complex derivatives-based instrument that may be difficult to assess due to limited transparency.
Speaking with journalists on Tuesday, Ebeke said similar transactions reviewed by the IMF in other countries often contained opaque terms, making it challenging to accurately evaluate the risks and long-term implications.
“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 the Federal Government to explore alternative financing options, including Eurobond issuances and concessional loans, rather than relying on derivative-backed funding arrangements.
The warning comes after the National Assembly approved President Bola Ahmed Tinubu’s request to secure $6 billion in external borrowing to support government spending and infrastructure development.
As part of the borrowing plan, the President sought legislative approval for a structured Total Return Swap (TRS) financing programme of up to $5 billion from First Abu Dhabi Bank.
According to Tinubu, the proposed funding is intended to support implementation of the 2026 budget, finance priority infrastructure projects and refinance existing domestic and external debt obligations.
The President also acknowledged that the additional borrowing would increase Nigeria’s public debt profile, which stood at approximately $110.3 billion, or N159.2 trillion, as of December 31, 2025.
The IMF’s intervention highlights growing concerns over the sustainability and transparency of public debt financing, particularly as developing economies seek alternative funding sources amid global economic uncertainties.
Analysts note that while structured financing arrangements can provide quick access to capital, they often require careful scrutiny to ensure they do not create hidden liabilities or expose countries to excessive financial risks.
The Federal Government has yet to officially respond to the IMF’s concerns regarding the proposed transaction.
