The International Monetary Fund has cautioned Nigeria against proceeding with a S5 billion derivatives-based loan from First Abu Dhabi Bank, warning that the deal is opaque and could expose the country to hidden financial risks. The Fund urged Nigeria to consider more conventional borrowing options such as Eurobonds or concessional loans.
Christian Ebeke, the IMF’s resident representative in Nigeria, told journalists: “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.” He added that derivative-backed financing could trigger additional liabilities if the value of underlying assets falls or exchange rates move unfavorably.
On March 31, 2026, the National Assembly approved President Bola Tinubu’s request for S6 billion in external loans, including a Total Return Swap arrangement of up to S5 billion with First Abu Dhabi Bank. The government argues the funds will support budget implementation, infrastructure projects, and refinancing of expensive debts. Nigeria’s public debt stock stood at S110.3 billion (N159.2 trillion) as of December 2025, raising concerns about debt sustainability.
A Total Return Swap allows a borrower to receive upfront cash backed by government securities, while the lender takes exposure to returns on those assets. Similar arrangements have been used by Senegal and Angola, but analysts warn they introduce complex valuation issues, contingent liabilities, and foreign exchange risks.
The IMF’s warning has sparked debate across Nigeria. On social media, one user wrote: “Why borrow in such a complicated way when we can’t even manage simple loans?” Another posted: “This looks like another debt trap. Transparency is key.”
Stakeholders also weighed in. A Lagos-based economist said: “Nigeria should avoid exotic instruments. Conventional Eurobonds or concessional loans are safer and easier to monitor.” The Nigeria Labour Congress warned: “Every new loan adds pressure on workers already struggling with inflation. Government must prioritize debt sustainability.”
Social commentators added their voices. Bismarck Rewane noted: “Military-style borrowing structures don’t solve fiscal problems. Nigeria needs reforms to boost revenue, not opaque loans.” Japheth Omojuwa tweeted: “This is not innovation; it’s gambling with Nigeria’s future. Citizens deserve clarity on how debts are structured.”
Policy makers defended the plan. A senior finance ministry official said: “This arrangement gives Nigeria flexibility in raising funds at a time when global borrowing costs are high. We are confident it will ease fiscal pressure.”
The IMF’s warning adds to growing scrutiny of Nigeria’s debt strategy. While the government insists the TRS deal will ease fiscal strain, critics argue it risks deepening opacity in public finance. Analysts say Nigeria must balance urgent funding needs with long-term debt sustainability, especially as 63% of Nigerians live in poverty and inflation remains high.
