The International Monetary Fund (IMF) has cautioned Nigeria against hastily proceeding with a proposed $5 billion Total Return Swap (TRS) financing arrangement with First Abu Dhabi Bank of the United Arab Emirates, describing the structure as opaque and potentially risky.
Speaking during a virtual briefing on the Fund’s 2026 Article IV Consultation Report on Nigeria, the IMF’s Resident Representative, Christian Ebeke, said such transactions often lack transparency and could expose countries to significant financial risks, particularly through margin calls if underlying assets lose value or the local currency depreciates.
The warning comes months after the National Assembly approved the Federal Government’s request to establish the derivatives-based financing programme, which is expected to be drawn in tranches to support budget financing, infrastructure projects and debt refinancing.
According to the IMF, Nigeria’s recent economic reforms have improved macroeconomic stability and strengthened the country’s access to international capital markets, providing alternative funding options.
The Fund suggested that the government could instead raise funds through Eurobond issuances or concessional financing arrangements, which are considered more transparent and less complex.
While acknowledging the gains recorded under ongoing reforms, the IMF stressed the need for authorities to closely monitor any risks associated with the proposed transaction to avoid unintended consequences for monetary and exchange rate policies.
The Fund also advised Nigeria to maintain a prudent fiscal stance in 2026 amid concerns over poverty and food insecurity, despite improvements in economic resilience.
