Despite concerns raised by the International Monetary Fund (IMF) and Fitch Ratings, the Federal Government has proceeded to draw the first tranche of a $5 billion loan agreement with the First Abu Dhabi Bank (FAB) worth $1.5 billion.

The Nigerian senate had in April approved the agreement following a request by President Bola Tinubu for external borrowing channels, as the country joined other African borrowers like Senegal and Angola who have tapped similar arrangements over the past year.

Ad >>>

According to Bloomberg, Friday, the Nigerian government accessed the funds two weeks ago through a structured total return swap (TRS) transaction with the United Arab Emirates (UAE) bank.

The borrowing plan comprised two facilities from the United Arab Emirates (UAE) and the United Kingdom, including a structured TRS financing programme of up to $5 billion from First Abu Dhabi Bank.

Tinubu had said the proposed borrowing would increase Nigeria’s public debt stock, which stood at $110.3 billion (about N159.2 trillion) as of December 31, 2025.

Meanwhile, Fitch Ratings had raised concerns over the loan deal with the UAE bank citing risks involved in the financing arrangement.

According to Fitch, while such transactions can provide liquidity, diversify funding sources and lower borrowing costs, they often fall outside conventional debt-reporting frameworks and could weaken transparency and legislative oversight.

The rating agency also said the structure could expose Nigeria to additional foreign exchange risks if domestic bond yields rise or the naira depreciates.

Similarly, the IMF had cautioned the government, earlier this month, while reacting to the Abu Dhabi Bank loan deal, that such transactions are often opaque and complex.

“Our view is that the transaction 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,” Christian Ebeke, IMF resident representative in Nigeria, told reporters.

Ebeke said Nigeria could instead issue eurobonds to finance its deficits or other means to raise funding, including on concessional terms.

Nigeria intends to use proceeds from the TRS to refinance expensive debt and pay for infrastructure.

It would be recalled that the IMF in its latest Article IV review, released, last week, had praised Nigeria’s sweeping reforms, saying they had strengthened economic stability and investor confidence, but warned that the benefits had ‌yet ⁠to reach millions of citizens and could be undermined by global shocks, including the Middle East conflict.

The reforms since 2023 under President Bola Tinubu – including fuel subsidy removal, tighter monetary policy and exchange rate liberalisation – had rebuilt buffers and improved macroeconomic management, the IMF said.

However, it cautioned that ⁠the reforms were also contributing to social strain, with poverty levels at 63 per cent and millions facing food insecurity, underscoring a widening gap between macro gains and household realities.

The IMF said improved policy ⁠credibility and forex reforms had helped Nigeria regain access to international capital markets and attract portfolio inflows, while reducing risk premiums. The central bank says gross reserves are at $50 ⁠billion, the highest in 17 years.

But reliance on volatile foreign portfolio investment poses rollover risks, the IMF said, urging a shift towards more stable, long-term capital such as foreign direct investment.