The Federal Government has drawn $1.5 billion from a $5 billion financing facility secured from the United Arab Emirates’ First Abu Dhabi Bank (FAB), despite concerns raised by the International Monetary Fund (IMF) and Fitch Ratings over the risks associated with the loan structure.
According to Bloomberg, the $1.5 billion is the first tranche of a financing agreement approved by the National Assembly in March 2026. The funds are expected to support the implementation of the 2026 budget, finance key infrastructure projects, and refinance some of Nigeria’s existing debt.
Unlike conventional loans, the facility is structured as a Total Return Swap (TRS), a financing arrangement that allows Nigeria to obtain immediate dollar liquidity without issuing new Eurobonds.
Under the agreement, Nigeria must pledge Federal Government securities worth about 133 percent of the amount borrowed as collateral. This means that for the entire $5 billion facility, the country would need to provide approximately $6.65 billion worth of naira-denominated government bonds.
In return, First Abu Dhabi Bank provides dollar funding while receiving returns generated from the pledged government securities. Nigeria, on its part, will pay a floating interest rate plus an additional margin.
The Federal Government believes the arrangement will ease pressure on foreign exchange reserves, support government spending and reduce reliance on more expensive international borrowing options.
However, the transaction has drawn criticism from global financial institutions.
In its June 2026 report, the IMF warned that financing arrangements such as Total Return Swaps often lack transparency and make it difficult for investors and creditors to accurately assess a country’s financial obligations.
Similarly, Fitch Ratings cautioned that the structure could expose Nigeria to hidden financial risks and increase pressure on public finances if the value of the pledged government securities falls significantly.
The rating agency also warned that such transactions may make it harder for investors to determine Nigeria’s actual debt profile because they are not reported in the same way as traditional loans or Eurobonds.
Despite the concerns, the financing provides Nigeria with much-needed foreign exchange at a time when the country is battling rising debt servicing costs, revenue challenges and persistent pressure on the naira.
Experts say while the facility offers short-term financial relief, its long-term success will depend on the government’s ability to manage the associated risks and maintain transparency in public debt reporting.
Nigeria’s public debt stood at approximately $110.3 billion (about ₦159.2 trillion) as of December 31, 2025, with debt servicing continuing to consume a significant portion of government revenue.
Source: Bloomberg
