IMF Questions Transparency of FG’s $5bn Swap Deal with UAE

• Advises govt to focus on Eurobonds, others to finance deficit 

•Urges CBN to maintain tight monetary policy 

•FG: Impact of inflation on Nigerians painful

The International Monetary Fund (IMF) yesterday raised concerns over the federal government’s plan to secure up to $5 billion through a Total Return Swap (TRS) arrangement with First Abu Dhabi Bank, warning that such financing structures are often opaque, complex and carry significant financial risks.

Speaking during a virtual briefing on the IMF’s 2026 Article IV Consultation Report on Nigeria, the Fund’s Resident Representative in Nigeria, Christian Ebeke, said although the country had regained access to international capital markets, authorities should exercise caution in pursuing the proposed transaction.

The warning comes weeks after Nigeria’s Senate approved the government’s request to raise as much as $5 billion through the swap arrangement, joining countries such as Senegal and Angola that have recently explored similar financing structures.

According to Ebeke, the IMF’s review of comparable instruments across several countries showed that the terms of such arrangements are often not sufficiently transparent, making it difficult to fully assess the risks involved.

“Our view is that transactions in these types of structures carry risks. Usually, they are opaque, so the terms are not always very transparent when we review these instruments across countries,” Ebeke stated.

Beyond transparency concerns, the IMF official noted that swap arrangements could expose countries to additional financial liabilities through margin calls if the value of underlying assets declines or if the domestic currency depreciates significantly.

“They also carry risk, as we flag in the report, the margin calls in the case that the value of the asset drops or the currency depreciates,” Ebeke added.

The federal government has indicated that proceeds from the proposed transaction would be used to refinance expensive debt obligations and support infrastructure development.

However, the IMF argued that Nigeria currently has alternative funding sources available to it, particularly given the country’s improving macroeconomic fundamentals and renewed access to international capital markets.

Ebeke suggested that the government could instead issue Eurobonds or seek concessional financing from development institutions and other multilateral lenders.

“We think that Nigeria has market access. Nigeria can issue Eurobonds to finance the deficit. We also think that there are other avenues for Nigeria to raise funds, including on concessional terms,” he said.

While noting that the IMF had not yet been provided with detailed information regarding the exact structure of the transaction, Ebeke stressed the need for authorities to carefully monitor any risks associated with the arrangement.

The IMF’s caution formed part of an assessment of Nigeria’s economy, which acknowledged that reforms undertaken since 2023 have significantly strengthened macroeconomic stability and improved the country’s resilience to external shocks.

On the broader reform agenda, the Fund said measures undertaken by the authorities have significantly improved Nigeria’s ability to withstand external pressures.

Ebeke said the reforms implemented by the administration have left the economy in a stronger position than in previous years. “These reforms are helping Nigeria withstand global economic shocks. The country is now in a stronger position to absorb external pressures than it was previously.

“Despite significant volatility in global markets, the naira in the parallel market is trading at levels that are relatively close to the official market rate. This is a clear indication that progress has been made in restoring macroeconomic stability and that Nigeria’s economy has become more resilient to external shocks,” he added.

In his submission, the IMF Mission Chief for Nigeria, Axel Schimmelpfennig, said recent reforms had helped Nigeria better withstand global economic uncertainties, including the ongoing conflict in the Middle East.

According to him, higher crude oil prices resulting from the conflict could boost Nigeria’s export earnings and government revenues, but could simultaneously worsen inflation through higher costs of fuel, food and fertilisers.

Schimmelpfennig stated that the IMF continues to support Nigeria’s flexible exchange rate regime, noting that the naira had appreciated against the US dollar since the beginning of the year.

He added that the Fund expects Nigeria’s economy to grow by 4.1 per cent in 2026 and accelerate further to 4.3 per cent in 2027, although both forecasts were lower than previous projections due to the economic consequences of the Middle East conflict.

The IMF also recommended that monetary policy remain restrictive for longer than previously envisaged to contain inflationary pressures, while urging the government to maintain a broadly neutral fiscal stance in 2026.

Despite recognising improvements in economic management, the Fund stressed that the benefits of recent reforms have yet to sufficiently reach millions of Nigerians, with poverty and food insecurity remaining significant challenges.

It therefore called for an expansion of social safety nets, including cash transfer programmes, while urging continued reforms aimed at improving electricity supply, infrastructure, security, agriculture, education and healthcare.

The IMF further reiterated the need for Nigeria to increase domestic revenue mobilisation, noting that the country still ranks among those with the lowest revenue-to-GDP ratios globally, limiting the government’s fiscal space to finance development priorities.

Global Bank Urges CBN to Keep Tight Monetary Policy

Besides, in the Executive Board’s assessment, following the conclusion of the 2026 Article IV Consultation with Nigeria, the Washington-based institution urged the Central Bank of Nigeria (CBN) to maintain a tight monetary policy stance, preserve recent economic reforms, and accelerate structural changes to protect the economy from renewed inflationary pressures, rising poverty and external shocks.

The IMF highlighted the need for the CBN to sustain its restrictive monetary policy stance until inflation is firmly under control. According to the Executive Board, “Directors commended the authorities’ success in bringing down inflation, while noting renewed external inflationary pressures.”

Consequently, the Board stressed that monetary easing would be premature.

“They agreed that the CBN should maintain a tight monetary policy stance with a data-dependent approach until disinflation is entrenched and inflation expectations are anchored,” it explained.

“Inflation remains high in the mid-teens, and bringing it down remains critically important. The Governor has spoken previously about achieving single-digit inflation, and we continue to believe that this is an important objective because inflation erodes the purchasing power of Nigerians.

 “Monetary policy has the primary responsibility of bringing inflation down. That is why the CBN has maintained a tight monetary policy stance to ensure that, even in the face of external shocks, inflation returns to a downward trajectory,” the IMF official said.

The IMF also welcomed progress towards the adoption of an inflation-targeting framework. “Directors welcomed progress toward adopting inflation targeting and encouraged steps to strengthen monetary transmission and communication,” it stated.

The IMF Executive Board similarly endorsed Nigeria’s commitment to a flexible exchange rate regime.

“Directors welcomed the authorities’ commitment to the flexible exchange rate regime, recognising that foreign exchange interventions can play a complementary role under certain circumstances.”

However, the Board advised the authorities to reduce dependence on foreign portfolio inflows.

It added: “Directors called for reducing reliance on portfolio flows with roll-over risk, phasing out remaining exchange restrictions, capital flow management measures, and remaining multiple currency practices as conditions permit.”

It  also welcomed recent tax reforms but said further measures may be required to strengthen public finances and support vulnerable households.

“Directors welcomed the recent tax reforms, noting that additional tax policy measures may be needed over the medium term, including to fund a scaled-up cash transfer program to provide relief to the most vulnerable.”

FG Bemoans Impact of Inflation on Nigerians

Meanwhile, the federal government has lamented the impact of inflation on Nigerians, stressing that President Bola Tinubu shared in the pains of the citizens. The government noted that  its efforts were already bearing results as the country was on the path to recovery despite prevailing hardship and security challenges.

The Secretary to the Government of the Federation, Senator George Akume, made the comments yesterday in Abuja at the National Press Conference organised to commemorate the 2026 Democracy Day.

Akume said: “The message from the government today is straightforward. This administration wishes to let us all recognise the fact that Nigeria is a huge, viable project and it is work- in-progress.

“The government, though with all hands on deck, would never claim that every challenge has been solved. While we pursue various reforms diligently, with purpose and with compassion, the government recognises that inflation has been painful, though it is on a downward trend.”

He pointed out that despite all, prevailing evidence indicated that the country was moving in the right direction and toward a more connected programme of delivery, stating that available statistical evidence signaled that confidence, market activity and productive exchange were responding to reforms.

The SGF said available economic indicators showed that the country’s fortunes were improving under the Renewed Hope Agenda, stressing that the Tinubu’s administration remained committed to delivering on its promises as it approached the 2027 general elections.

He vowed that the government would seek, “a revalidation of our mandate” from Nigerians at the elections.

According to him, Nigeria’s economy has recorded steady growth, with real GDP expanding by 4.07 per cent in the fourth quarter of 2025 and 3.89 per cent in the first quarter of 2026.

While acknowledging that inflation and insecurity continue to affect citizens, the SGF maintained that the government’s reforms were beginning to produce tangible results.

“Government will never claim that every challenge has been solved,” he said. “Inflation has been painful, though it is on a downward trend. Insecurity still threatens lives and livelihoods, but evidence shows that the country is moving in the right direction.”

He described the Democracy Day briefing as part of the administration’s commitment to accountability, saying June 12 was not merely a date but a reminder that democracy carries both memory and mandate.

He congratulated Nigerians for sustaining 27 uninterrupted years of democratic governance, describing the feat as one of the longest democratic experiences on the African continent.

Highlighting some of the administration’s achievements, the SGF said over 3 million vulnerable households had benefited from the Renewed Hope Conditional Cash Transfer Programme, while nearly one million Nigerians had accessed support under various government credit schemes.

He disclosed that the Nigerian Consumer Credit Corporation (CreditCorp) had disbursed N37 billion in consumer loans, with more than half of the beneficiaries obtaining formal credit for the first time.

On education, Akume said the Nigerian Education Loan Fund (NELFUND) had supported more than 1.058 million students since the implementation of the Student Loan Act, with over N184 billion released for tuition and upkeep allowances.

He added that the administration had expanded access to healthcare through the National Health Insurance Authority framework and increased funding for primary healthcare facilities across the country.

Akume also touted the government’s anti-corruption drive, noting that proceeds recovered by anti-graft agencies had strengthened public interventions, including the transfer of more than N50 billion in recovered assets to support NELFUND.

According to him, Nigeria’s removal from the Financial Action Task Force (FATF) grey list in October 2025 reflected the impact of reforms in anti-money laundering and counter-terrorism financing.

On security, Akume said the federal government was investing heavily in military capabilities and regional cooperation to combat terrorism, banditry and other criminal activities.

He, however, urged citizens to complement government efforts by remaining vigilant and reporting suspicious movements to security agencies.  “We can say clearly that institutional responses are being sharpened, coordination is improving, and reforms are continuing because peace and civic order are foundations of democratic progress,” he stated.

The SGF further urged national unity and religious tolerance, saying diversity should be harnessed as a democratic strength rather than a source of division.

He said: “As we go into the cycle for the 2027 general elections, our responsibility is to finish what we commenced in 2023 and scale what is working. Our task is not completed yet and, under the leadership of President Bola Ahmed Tinubu, more dividends will be delivered.”