The International Monetary Fund (IMF) has cautioned the Federal Government against proceeding with a proposed $5 billion borrowing arrangement involving the First Abu Dhabi Bank of the United Arab Emirates, warning that the deal could expose Nigeria to significant financial risks.
The warning was issued on Tuesday by the IMF Resident Representative for Nigeria, Christian Ebeke, during the presentation of the Fund’s 2026 Article IV Consultation Report on Nigeria.
According to the IMF, the proposed financing arrangement, structured under a Total Return Swap (TRS), lacks sufficient transparency and could create future liabilities for the country if market conditions turn unfavourable.
The warning comes at a time when Nigeria is grappling with rising public debt, foreign exchange pressures and the need for increased funding to support economic reforms and infrastructure development.
Speaking during the presentation, Ebeke said the IMF remains concerned about the risks associated with the borrowing structure and similar financing arrangements used in several countries.
“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,” he said.
He explained that while such financing mechanisms may provide governments with quick access to funds, they often contain complex conditions that may not be fully understood by the public or even policymakers.
According to him, one of the major concerns is that the arrangement could expose Nigeria to additional financial obligations if the assets tied to the transaction lose value or if the naira weakens significantly against major foreign currencies.
“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,” Ebeke said.
Margin calls are demands for additional payments or collateral when the value of assets used in a financial transaction declines. Such situations can create unexpected financial burdens for governments and increase pressure on public finances.
The IMF official noted that the Fund currently has limited details about the specific terms of the proposed agreement between Nigeria and the Abu Dhabi-based bank.
However, he stressed that the Fund’s position remains unchanged and that the risks associated with the arrangement should be carefully monitored.
“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,” he stated.
The proposed transaction has attracted attention because of its size and structure. In April 2026, the Nigerian Senate approved the agreement, paving the way for the government to move ahead with the borrowing plan.
The approval placed Nigeria among a growing number of African countries that have adopted similar financing arrangements to raise funds outside traditional loan markets.
Countries such as Senegal and Angola have reportedly used comparable structures to access financing for government programmes and development projects.
A Total Return Swap is a financial arrangement in which one party receives the returns generated by an asset while another party assumes certain financial risks associated with that asset. Such deals are often used by investors and financial institutions, but they can be complicated and difficult for the public to fully understand.
The IMF has consistently encouraged countries, particularly developing economies, to ensure that borrowing arrangements remain transparent and sustainable.
In recent years, Nigeria’s debt profile has become a major subject of public debate as government borrowing continues to rise amid growing demands for infrastructure, social programmes and economic reforms.
Since assuming office in May 2023, President Bola Tinubu’s administration has implemented a series of economic measures aimed at stabilising the economy. These include the removal of fuel subsidies, reforms in the foreign exchange market and efforts to improve government revenue.
While international financial institutions have welcomed some of these reforms, concerns remain over Nigeria’s debt servicing costs and the impact of additional borrowing on public finances.
According to official figures released in recent years, a significant portion of government revenue has been used to service existing debts, leaving less money available for critical sectors such as healthcare, education and infrastructure.
Economists have repeatedly stressed the need for the government to strike a balance between raising funds for development and ensuring that borrowing remains affordable and sustainable.
The IMF’s latest warning is therefore likely to fuel further debate among policymakers, lawmakers and economic experts about the best way to finance Nigeria’s development needs.
Supporters of the proposed deal may argue that the funding could provide much-needed capital for government programmes and investment projects.
However, critics are expected to point to the IMF’s concerns as evidence that greater scrutiny is needed before the transaction proceeds.
The Federal Government has not publicly responded to the IMF’s latest comments. However, the Senate’s earlier approval of the arrangement suggests that authorities consider it an important financing option.
Analysts say the coming months will be crucial as more details about the agreement emerge and stakeholders assess its potential benefits and risks.
For now, the IMF is urging caution, insisting that the proposed borrowing structure should be carefully examined to avoid exposing Nigeria to financial obligations that could become difficult to manage in the future.
With economic reforms already placing pressure on households and businesses, experts say any major borrowing decision must be transparent, sustainable and aligned with the country’s long-term economic interests.