Nigeria Proceeds With $5 Billion UAE Financing Deal Despite IMF Concerns
Nigeria has moved ahead with a major $5 billion financing arrangement with the United Arab Emirates (UAE), despite concerns raised by the International Monetary Fund (IMF) over the potential risks associated with the structure of the loan.
According to recent reports, Africa’s largest economy has already drawn down the first $1.5 billion from the financing facility, marking the initial phase of a broader $5 billion Total Return Swap (TRS) agreement secured through First Abu Dhabi Bank, the UAE’s largest financial institution.
The financing package received approval from Nigeria’s National Assembly on March 31, 2026, with lawmakers describing the terms as competitive and beneficial for the country’s fiscal needs. The funds are expected to play a significant role in supporting Nigeria’s 2026 national budget, financing key infrastructure projects, and helping the government restructure portions of its existing debt portfolio.
Under the terms of the agreement, the first tranche of the loan will be priced at 395 basis points above the Secured Overnight Financing Rate (SOFR), while future drawdowns will attract an interest rate of SOFR plus 400 basis points.
As part of the arrangement, Nigeria will provide collateral equivalent to 133.3% of the loan’s value in assets denominated in the country’s local currency. The latest facility also strengthens the financial relationship between Nigeria and First Abu Dhabi Bank, which had previously extended approximately $1.2 billion in financing to support the construction of sections of a major expressway in the country.
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However, the transaction has attracted scrutiny from the International Monetary Fund.
During the IMF’s latest Article IV consultation with Nigeria, the Fund expressed reservations about the increasing use of complex financing instruments such as Total Return Swaps, warning that such arrangements often lack sufficient transparency and can make it difficult for governments, investors, and the public to fully assess the long-term fiscal risks involved.
The IMF’s Mission Chief for Nigeria, Christian Ebeke, noted that these types of financial structures can be opaque, making it challenging to evaluate their full 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 after the consultation.
The IMF also cautioned that certain aspects of the agreement could potentially create political constraints on Nigeria’s future monetary and exchange-rate policies, urging authorities to maintain transparency and prudent debt management as they pursue alternative financing sources.
Despite the concerns, the Nigerian government has proceeded with the transaction, viewing the facility as an important source of funding to address infrastructure deficits, support economic growth, and strengthen public finances amid growing development needs.
According to the latest figures published by Nigeria’s Debt Management Office, the country’s external debt stood at approximately $51.9 billion as of December 31, highlighting the importance of carefully balancing new borrowing with long-term debt sustainability.
