IMF Questions Transparency of Nigeria's $5 Billion Swap Deal with UAE

The International Monetary Fund (IMF) has cautioned Nigeria against its plan to secure up to $5 billion through a Total Return Swap (TRS) arrangement with First Abu Dhabi Bank. The fund warned that such financing structures are often opaque, complex, and carry significant financial risks.

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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.

During a virtual briefing on the IMF’s 2026 Article IV Consultation Report on Nigeria, Christian Ebeke, the IMF's Resident Representative in Nigeria, advised the federal government to exercise caution. He noted that while Nigeria has regained access to international capital markets, comparable instruments reviewed across several countries revealed that the terms of such arrangements are frequently not transparent enough to fully assess the associated risks.

"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 stated. He further highlighted that swap arrangements could expose countries to additional financial liabilities through margin calls if the value of underlying assets declines or if the domestic currency depreciates significantly.

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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.

The Nigerian Senate had approved the government's request to raise funds through this swap arrangement, a move also explored by countries like Senegal and Angola. The federal government intends to use the proceeds to refinance expensive debt and support infrastructure development. However, the IMF suggested that Nigeria has alternative funding sources available, including issuing Eurobonds or seeking concessional financing from development institutions, given its improving macroeconomic fundamentals and renewed market access.

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We think that Nigeria has market access. Nigeria can issue Eurobonds to finance the deficit. We also think that there are other avenues for Nigeria to raise funds, including on concessional terms.