Despite IMF warnings, Nigeria is banking on $5 billion in Emirati funding to revive its economy.

Written by Omnia Hassan

Nigeria is continuing to implement its plan to boost its economy, having moved forward with a $5 billion financing agreement with the United Arab Emirates, ignoring warnings from the International Monetary Fund about the potential risks of this deal and its long-term effects.

First installment to support the economy and infrastructure

The Nigerian government has already begun to benefit from the agreement, having withdrawn $1.5 billion from the credit facility arranged with First Abu Dhabi Bank, in a move aimed at supporting the 2026 budget, financing vital infrastructure projects, and restructuring part of its external debt.

The Nigerian parliament had approved the agreement last March, considering the financing terms to be competitive and providing the government with liquidity to help it implement its development plans during the next phase.

Controversial funding mechanism

The agreement is based on a financing structure known as a “total return swap” (TRS), a financial instrument used in global markets, but it has raised concerns from the International Monetary Fund, which believes that such arrangements may be complex and lack transparency, making it difficult to accurately assess the associated risks.

Nigeria will also provide guarantees equivalent to approximately 133.3% of the loan value using assets denominated in the local currency, which gives lenders a high level of security.

The IMF warns of future risks

The IMF stressed that some provisions of the agreement may impose future restrictions on monetary policy or exchange rate management, noting that complex financing structures could increase financial burdens if not managed carefully.

Fund officials stressed the importance of full disclosure of the terms of these arrangements to ensure clarity of financial commitments and to protect long-term economic stability.

High debt and a bet on growth

The agreement comes at a time when Nigeria’s external debt stands at around $51.9 billion, according to the latest data from the Debt Management Office, while the government is betting that Emirati funding will accelerate the implementation of infrastructure projects, stimulate economic growth, and attract more investments.

Observers believe that the success of this step will depend on the Nigerian government's ability to utilize the funding efficiently and achieve economic returns that boost revenues and reduce the increasing pressure on public finances, in light of the ongoing challenges facing Africa's largest economy.