The International Monetary Fund, IMF, has advised the Federal Government to exercise caution over its proposed $5 billion loan arrangement with First Abu Dhabi Bank, FADB, of the United Arab Emirates, warning that the financing structure carries significant risks.
The proposed facility, known as the Total Return Swap, TRS, External Financing Programme, would allow Nigeria to borrow $5 billion in cash while pledging naira-denominated government bonds valued at 133.3 per cent of the loan amount as collateral.
Speaking during the Nigeria 2026 Article IV briefing, IMF Resident Representative in Nigeria, Christian Ebeke, said Nigeria still has other financing options and should carefully weigh the risks attached to the proposed arrangement.
According to him, Nigeria can still access international markets and concessional funding from multilateral institutions to finance its deficit.
“On the TRS, Nigeria has market access. It carries risks and it is important to consider that. There are options for Nigeria. Nigeria can issue Eurobonds and indeed borrow from multilateral institutions on concessional terms. Nigeria can take advantage of those options for its deficit funding,” Ebeke said.
In its policy recommendations, the IMF Executive Board said a neutral fiscal stance in 2026 would help support macroeconomic stability, especially in view of renewed inflationary pressures.
The Fund said Nigeria’s domestic revenue mobilisation efforts were rightly focused on administrative improvements in 2026, but added that tax rate increases may be required over the medium term.
“A neutral fiscal stance in 2026 would support macroeconomic stability, given renewed inflationary pressures. Domestic revenue mobilisation is appropriately focused on administrative gains in 2026, while tax rate increases will likely be needed over the medium-term,” the IMF stated.
The Fund also urged the Federal Government to secure funding for the cash transfer programme in order to support vulnerable Nigerians.
It further called for faster progress in improving fiscal transparency, accountability and budget processes.
Defending the recommendation on taxes, IMF Mission Chief for Nigeria, Axel Schimmelpfennig, said Nigeria’s tax rates remain among the lowest in the region, noting that the country’s Value Added Tax rate is about half of what obtains in neighbouring countries.
He, however, clarified that the IMF’s position on tax rate increases was a medium-term recommendation and not an immediate demand.
On monetary policy, the IMF advised that policy should remain tight for longer than previously expected due to inflationary pressures caused by the war in the Middle East and a global risk-off environment.
The Fund also advised the Central Bank of Nigeria, CBN, to reduce its reliance on expensive portfolio inflows, warning that such inflows expose the country to rollover risks.
“Monetary policy must remain tight for longer than previously expected given inflationary pressures from the war in the Middle East and a global risk-off environment,” the IMF said.
It added that “the Central Bank of Nigeria should reduce its reliance on expensive portfolio inflows that pose a rollover risk.”
The IMF acknowledged that recent reforms had strengthened Nigeria’s macroeconomic stability, but warned that living conditions remain difficult for millions of citizens.
According to the report, poverty reached 63 per cent based on the national poverty line, while about 27 million Nigerians were estimated to have faced food insecurity in the fall of 2025.
The Fund also warned that while higher global fuel, food and fertiliser prices may improve exports and fiscal revenues, they could also worsen inflationary pressures, aggravating poverty and food insecurity.
“Higher global fuel, food and fertilizer prices will improve exports and fiscal revenues, but also give rise to inflationary pressures, potentially aggravating poverty and food insecurity,” the IMF stated.
The Fund projected that inflation would continue easing in the second half of the year.
It also estimated the consolidated government deficit at 4.4 per cent of Gross Domestic Product, GDP, in 2025.
The IMF called for sustained reforms in power, infrastructure, agriculture, human capital development and security to support inclusive growth and improve living conditions.
The warning comes as Nigeria continues to explore financing options to fund its budget deficit while seeking to maintain macroeconomic stability, attract investment and reduce pressure on public finances.
The post “It Carries Risks” — IMF Warns Nigeria Against Proposed $5bn First Abu Dhabi Bank Loan, Urges Eurobond, Concessional Funding Options appeared first on TheNigeriaLawyer.
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