The International Monetary Fund (IMF) has cautioned Nigeria against proceeding hastily with a proposed $5 billion Total Return Swap (TRS) financing arrangement with First Abu Dhabi Bank, warning that such financial structures are often opaque and potentially risky.
The IMF Resident Representative for Nigeria, Christian Ebeke, raised the concern on Tuesday during a virtual press briefing on the Fund’s 2026 Article IV Consultation Report on Nigeria.
He noted that while Nigeria has improved access to international capital markets, complex financing instruments such as swap arrangements require careful scrutiny due to limited transparency in their terms.
“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,” Ebeke said.
His remarks come weeks after Nigeria’s Senate approved the Federal Government’s plan to raise up to $5 billion through a Total Return Swap arrangement reportedly linked to First Abu Dhabi Bank.
The IMF official further warned that such deals could expose countries to additional financial risks, particularly if the value of underlying assets declines or if exchange rates move unfavourably.
“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,” he added.
Ebeke stressed that Nigeria has other financing options that may be more transparent and less complex, including Eurobond issuance and concessional borrowing.
“We think that Nigeria has market access. Nigeria can issue Eurobonds to finance the deficit. And we also think that there are other avenues for Nigeria to raise funds, including on concessional terms,” he said.
He clarified that the IMF did not yet have full details of the proposed swap structure but urged Nigerian authorities to closely monitor associated risks.
“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 said.
The caution formed part of the IMF’s broader assessment of Nigeria’s economic reforms, which it acknowledged have strengthened macroeconomic stability and improved resilience to external shocks over the past three years.
IMF Mission Chief for Nigeria, Axel Schimmelpfennig, said the reforms had helped the economy better absorb global pressures, including those linked to ongoing geopolitical tensions.
“One of the key messages from the report is that strong reforms over the past three years have improved macroeconomic outcomes and improved resilience,” he said.
He added that rising global oil prices could boost Nigeria’s export earnings and fiscal revenues but may also drive inflation through higher fuel, food, and fertiliser costs.
The IMF projected Nigeria’s economy to grow by 4.1 per cent in 2026 and 4.3 per cent in 2027, although it noted that forecasts were revised downward due to global conflict-related pressures.
Schimmelpfennig said monetary policy should remain tight for longer than previously expected to help contain inflation risks.
He also urged continued expansion of Nigeria’s cash transfer programmes to support vulnerable households, alongside sustained reforms in infrastructure, electricity, security, agriculture, education, and healthcare.
The Fund reiterated the need for improved revenue mobilisation, noting that Nigeria’s tax-to-GDP ratio remains among the lowest globally.
According to the IMF, strengthening tax administration and gradually aligning tax rates with peer economies would help create fiscal space for development, while ensuring targeted protection for low-income households.
