The International Monetary Fund (IMF) has urged Nigeria to exercise caution over its proposed $5 billion Total Return Swap (TRS) financing deal with First Abu Dhabi Bank, warning that such arrangements often come with hidden risks and limited transparency. The caution comes despite growing confidence in Nigeria’s economy and improved access to international capital markets following recent economic reforms.
Speaking during a virtual briefing on the IMF’s 2026 Article IV Consultation Report on Nigeria, the Fund’s Resident Representative, Christian Ebeke, described Total Return Swap structures as complex financial instruments that could expose countries to significant risks. According to him, the terms attached to such agreements are often difficult to scrutinize, making it challenging for stakeholders to fully understand their long-term implications.
Ebeke noted that beyond transparency concerns, the proposed financing arrangement could leave Nigeria vulnerable to market shocks. He explained that fluctuations in asset values or adverse currency movements could trigger costly margin calls, potentially increasing financial pressure on the government. The warning comes shortly after the Nigerian Senate approved plans for the Federal Government to raise up to $5 billion through the swap deal reportedly linked to First Abu Dhabi Bank.
The IMF official stressed that Nigeria currently has other financing options that may be safer and more transparent. He pointed to Eurobond issuances and concessional funding opportunities as viable alternatives for bridging fiscal gaps. While admitting that the IMF has not yet received detailed information about the structure of the proposed transaction, Ebeke emphasized the importance of carefully monitoring any risks associated with the deal before implementation.
Despite its concerns over the swap arrangement, the IMF praised Nigeria’s recent economic reforms, saying they have strengthened macroeconomic stability and improved resilience against global shocks. The Fund projected that Nigeria’s economy will expand by 4.1 percent in 2026 and 4.3 percent in 2027. However, it warned that ongoing tensions in the Middle East could fuel inflation through rising fuel, food, and fertilizer prices. The IMF also encouraged the government to maintain prudent fiscal policies, expand social support programmes, improve infrastructure and security, and continue efforts to boost tax revenue to support long-term economic growth.
source: punch