IMF warns Nigeria on $5 billion deal with First Abu Dhabi Bank

The International Monetary Fund (IMF) has raised concerns about Nigeria's plan to secure a $5 billion swap deal with First Abu Dhabi Bank from the UAE. They pointed out that such contracts can be complex and often lack transparency.

Christian Ebeke, the IMF’s representative in Nigeria, shared this at a virtual briefing about the IMF’s 2026 Article IV Consultation Report on Nigeria on Tuesday. He said, “Our view is that the transactions in these types of structures carry risks.”

He added, “Usually, they are opaque, so the terms are not always very transparent when we reviewed these instruments across countries.”

Nigeria wants to enter the derivatives market to borrow $5 billion, which is about 1.3 percent of its GDP. This comes as the country faces high costs for raising regular debt like bonds, especially with the ongoing US-Israel war.

A swap is a type of contract that allows two parties to exchange cash flows or financial responsibilities. This is often done to manage risks, like interest rate changes.

Funds from this total return swap will go into infrastructure projects and to refinance “more expensive” local and foreign debts. This information was reported by Reuters in April, citing a document submitted to the National Assembly.

The loan will be supported by naira-denominated assets, which will have a value that exceeds the loan amount by up to 33.3 percent, according to the report.

The Senate approved the deal in April. This allows Nigeria to follow in the footsteps of other African countries like Angola and Senegal who have also taken similar steps.

Ebeke suggested that Nigeria could consider issuing Eurobonds to cover its deficits. He also mentioned looking into other options for raising funds, especially on concessional terms.

He cautioned that, while Nigeria has regained access to international capital markets after implementing some investor-friendly reforms, the proposed swap deal should be handled carefully.

He said, “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.”

The IMF’s 2026 Article IV Consultation Report on Nigeria warns that this agreement could expose the government to margin calls if the value of naira-denominated securities used as collateral decreases. This could lead to political challenges regarding monetary or exchange rate policies.