The International Monetary Fund (IMF) has endorsed the economic reform programme of President Bola Tinubu’s administration, while cautioning the federal government over a proposed $5 billion Total Return Swap (TRS) financing arrangement with First Abu Dhabi Bank.
In a virtual press briefing on Tuesday marking the end of its 2026 Article IV Consultation Report on Nigeria, the IMF’s Resident Representative, Christian Ebeke, commended the authorities for three years of reforms that have “strengthened macroeconomic stability and resilience.”
However, speaking on the proposed transaction, Mr Ebeke said: “Our view is that the transaction and 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.”
His remarks come weeks after the Senate approved the federal government’s request to raise up to $5 billion through a TRS arrangement with a Middle Eastern bank, widely reported to be First Abu Dhabi Bank.
Mr Ebeke noted that beyond transparency concerns, such financing arrangements could expose countries to additional financial risks should underlying assets lose value or exchange rates move adversely.
“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,” he said.
According to him, Nigeria currently has alternative funding options that may be less complicated and more transparent. “We think that Nigeria has market access. Nigeria can issue Eurobonds to finance the deficit. And we also think that there are other avenues for Nigeria to raise funds, including on concessional terms.”
While noting that the IMF does not yet have detailed information on the proposed swap structure, Mr Ebeke urged authorities to monitor the transaction’s potential risks closely.
Reforms have improved resilience
Earlier, the IMF Mission Chief for Nigeria, Axel Schimmelpfennig, said recent reforms had enhanced resilience and helped the country manage the economic fallout from the ongoing conflict in the Middle East.
“One of the key messages from the report is that strong reforms over the past three years have improved macroeconomic outcomes and improved resilience,” he said.
Mr Schimmelpfennig noted that higher global oil prices resulting from the conflict could improve Nigeria’s export earnings and government revenues, but would also create inflationary pressures through increased fuel, food, and fertiliser costs.
He recommended a broadly neutral fiscal stance for 2026, with the budget deficit remaining largely unchanged relative to 2025, to support macroeconomic stability and complement the Central Bank of Nigeria’s efforts to curb inflation.
“We continue to think that the flexible exchange rate regime is serving Nigeria well, and we’ve even seen an appreciation against the US dollar since the start of the year,” he said.
Growth projections
The IMF projects that Nigeria’s economy will grow by 4.1 per cent in 2026 and 4.3 per cent in 2027, though these forecasts are lower than previous projections due to the economic consequences of the Middle East conflict.
Mr Schimmelpfennig stressed that monetary policy should remain restrictive for longer than previously anticipated, given renewed inflationary pressures stemming from global developments.
He further urged the government to continue expanding its cash transfer programme to cushion the impact of economic shocks on vulnerable households, while sustaining reforms aimed at improving infrastructure, electricity supply, security, agriculture, education, and healthcare.
The Fund reiterated its support for efforts to increase government revenue, noting that Nigeria remains among the countries with the lowest revenue-to-GDP ratios globally.
