The International Monetary Fund (IMF) has raised concerns over Nigeria’s proposed plan to secure up to $5 billion through a derivatives-based financing arrangement with UAE lender First Abu Dhabi Bank.
According to the IMF, transactions structured through derivatives and Total Return Swaps are often complex and lack transparency, making it difficult to properly assess long-term financial risks. IMF Resident Representative in Nigeria, Christian Ebeke, warned that such arrangements could expose the country to hidden liabilities and refinancing risks.
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Nigeria’s Senate approved the financing arrangement in April as the government seeks alternative funding options amid rising global borrowing costs. Similar funding structures have previously been used by African countries such as Senegal and Angola.
The Federal Government, however, defended the move, saying the funds are intended to refinance expensive debt and support infrastructure development while maintaining economic reforms introduced under President Bola Tinubu’s administration. Officials also argued that Nigeria is diversifying its funding sources due to tighter global financial conditions.
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The IMF acknowledged that Nigeria’s recent economic reforms ,including fuel subsidy removal, foreign exchange liberalization, and tighter monetary policies , have helped improve macroeconomic stability and investor confidence. However, it stressed that poverty and food insecurity remain major concerns despite the reforms.
DDNewsOnline – Lagos
By Ayomiposi Adebanjo (A.A)
Business Correspondent
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