An IMF staff report for Nigeria’s 2026 Article IV consultation, published on June 9 after the Executive Board concluded the review on June 1, said the government’s proposed $5 billion total return swap with First Abu Dhabi Bank would add fiscal and liquidity risks because of both its structure and size.
According to the report, the transaction carries an interest cost comparable to Nigeria’s Eurobond yield, requires collateral equal to 133% of the amount in domestic government securities, and includes fees. It also exposes the government to margin calls if the foreign-exchange value of the naira securities falls because of naira depreciation or higher domestic interest rates. The IMF said these obligations could affect monetary and exchange-rate policy choices, and it added the full value of the collateral to debt in its debt sustainability analysis until the swap matures.
The report said that, together with a possible Eurobond issue later in the year, the borrowing could leave the budget overfinanced and allow the government to build deposits at the central bank. It added that off-budget spending and complex financing instruments can weaken fiscal reporting and raise rollover and liquidity risks. Banks hold government securities equal to 22% of total assets, pension assets equal to 6.4% of GDP are concentrated in government paper, and federal interest payments are projected to absorb more than half of revenue across 2025 to 2027.
The IMF said contingent liabilities include possible additional collateral calls under the swap, arrears to NNPCL, electricity companies and pensioners once recognized, and any pre-export financing that reduces future revenue. It said Eurobonds or concessional borrowing would be more transparent alternatives for deficit financing. Nigeria’s Debt Management Office reported total public debt of $103.94 billion as of Sept. 30, 2025, with external debt accounting for 46.63% of the total.