IMF flags risks in Nigeria’s planned $5 billion derivative deal with First Abu Dhabi Bank

The International Monetary Fund (IMF) has identified potential risks in Nigeria's proposed $5 billion swap deal with First Abu Dhabi Bank, citing the inherent complexity and opacity of such financial instruments. Christian Ebeke, the IMF's resident representative in Nigeria, stated during a virtual briefing on the IMF's 2026 Article IV Consultation Report that these types of transactions "carry risks" and are "usually opaque."

Nigeria aims to leverage the derivatives market to secure $5 billion, equivalent to 1.3% of its GDP, through the swap deal. This move comes as the costs of traditional debt instruments, like bonds, are escalating, partly influenced by the U.S.-Israel conflict. A total return swap allows two parties to exchange cash flows, often used for risk management. Reuters reported in April that funds raised would be invested in infrastructure projects and refinancing existing debts.

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Our view is that the transactions in these types of structures carry risks. Usually, they are opaque⁠, so the terms are not always very transparent when we reviewed these instruments across countries

The Nigerian Senate approved the deal in April, following similar actions by other African nations like Angola and Senegal. The loan is to be secured by naira-denominated instruments valued higher than the loan itself. However, Ebeke suggested Nigeria could explore alternatives such as issuing Eurobonds or seeking concessional financing.

The IMF's report highlights that the agreement could expose the Nigerian government to "margin calls" if the value of the pledged collateral, naira-denominated securities, declines. Such a scenario could create political constraints on monetary and exchange rate policies. The fund urged caution, despite Nigeria's recent return to international capital markets following investor-friendly reforms.

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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