IMF warns Nigeria over $5bn loan deal with Abu Dhabi bank, cites opacity risks

The International Monetary Fund (IMF) has raised concerns over Nigeria’s proposed $5 billion borrowing arrangement with First Abu Dhabi Bank, warning that the structure of such financing instruments may be opaque, complex and difficult to properly assess in terms of fiscal risk exposure.

Christian Ebeke, the IMF’s Mission Chief for Nigeria, said instruments like Total Return Swaps (TRS) often lack transparency, making it harder for stakeholders to fully evaluate their terms 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,” Ebeke told reporters following the Fund’s latest Article IV consultation.

Nigeria’s Senate approved the borrowing arrangement in April, with the Federal Government stating that proceeds would be used to refinance high-cost debt and fund infrastructure projects. Similar financing structures have been deployed in parts of Africa, including Senegal and Angola, as governments explore alternative funding channels amid tightening global liquidity.

However, the IMF advised Nigeria to prioritise more transparent financing options such as Eurobond issuances or concessional loans, arguing that clearer structures would reduce fiscal risks and strengthen investor confidence.

The warning came alongside a broadly positive assessment of Nigeria’s reform programme under President Bola Tinubu, with the Fund acknowledging that policy measures introduced since 2023—such as fuel subsidy removal, exchange rate liberalisation and tighter monetary policy—have strengthened macroeconomic stability and improved external buffers.

It noted that Nigeria’s foreign reserves have risen to about $50 billion, the highest level in 17 years, supported by improved forex reforms that have helped restore investor confidence and attract capital inflows.

Despite these gains, the IMF cautioned that improvements have not yet translated into broad-based welfare outcomes, warning that poverty and food insecurity remain widespread.

The Fund also highlighted risks linked to volatile portfolio inflows and external shocks, including rising global energy prices driven by geopolitical tensions.

In response, the Federal Government defended its economic strategy, describing the IMF report as validation of its reform agenda and insisting that difficult policy decisions were necessary to stabilise the economy and rebuild investor confidence.

Authorities argued that improved revenue mobilisation, fiscal transparency reforms and public financial management measures would ensure that borrowing remains sustainable and directed toward productive investments, even as global uncertainties continue to weigh on the outlook.

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