Be clear-eyed about $5bn UAE loan

On March 31, 2026, President Bola Tinubu announced that Nigeria had secured approval for a $5 billion loan from the United Arab Emirates’ First Abu Dhabi Bank, intended to finance critical infrastructure projects and support the expanded 2026 national budget. However, the International Monetary Fund (IMF) recently raised serious concerns about the loan because of […]

On March 31, 2026, President Bola Tinubu announced that Nigeria had secured approval for a $5 billion loan from the United Arab Emirates’ First Abu Dhabi Bank, intended to finance critical infrastructure projects and support the expanded 2026 national budget. However, the International Monetary Fund (IMF) recently raised serious concerns about the loan because of its repayment methods, based on a derivative Total Return Swap structure. The Fund warned that that method of repayment is opaque and could expose Nigeria to hidden liabilities.

In a derivative-based Total Return Swap (TRS) loan, repayment is tied to the performance of pledged assets, like Nigeria’s crude oil, rather than fixed instalments alone. If, for example, Nigeria pledges crude oil for repayment, the UAE bank shall insist on receiving the “total return” on those securities—meaning all interest payments and any capital gains, based on the value of crude oil at every time it makes repayment.  Nigeria must pay a floating interest rate, plus the gains that accrue to it. If the value of the pledged securities falls, Nigeria must provide additional collateral in U.S. dollars, creating sudden repayment obligations.

The IMF fears that such opaque financing could worsen Nigeria’s already fragile debt profile, which stood at over $110 billion by the end of 2025. In its statement, the Fund stressed that these transactions are “usually opaque” and “carry risks,” urging Nigeria to pursue more transparent alternatives. While the government insists the loan is vital for plugging budget gaps and financing priority infrastructure projects, the IMF’s warning underscores the delicate balance between Nigeria’s urgent need for development financing and the dangers of complex, high-risk borrowing.

The government has argued that the $5 billion loan is intended to finance priority infrastructure projects that are central to the administration’s economic growth agenda. Chief among these is the Lagos–Calabar Coastal Highway, a massive 700 km project designed to connect Lagos, in the South West, to Calabar, in the South-South. In addition, the government has earmarked part of the funds for port rehabilitation in Lagos, with a separate $1 billion loan from UK Export Finance complementing the UAE financing to modernise Nigeria’s busiest maritime hub. Other projects tied to the loan include energy infrastructure upgrades and transportation improvements across key parts of Nigeria, aimed at easing logistics bottlenecks and boosting productivity. President Bola Tinubu has described the UAE-backed deal as a “major achievement,” stressing that it ensures uninterrupted progress on flagship projects that will anchor Nigeria’s long-term development.

Perhaps the government is attracted to the UAE loan because the IMF’s facilities it has received over the past four years were not meant to fund infrastructural projects.  Nigeria has borrowed much directly from the IMF, most notably in 2020 when it received $3.4 billion under the Rapid Financing Instrument (RFI). This loan was not designed for infrastructure projects but rather to provide emergency support during the COVID-19 pandemic. The funds were used to stabilise Nigeria’s balance of payments, shore up foreign reserves, and finance urgent health and social protection programmes. Apart from the 2020 loan, the IMF only provides policy advice through Article IV consultations, focusing on fiscal reforms, subsidy removal, debt sustainability, and revenue mobilisation.  The government, therefore, has to look elsewhere, like the World Bank and bilateral facilities for infrastructure.

We are not totally against government loans, because well-implemented infrastructure loans can be transformative for a country’s development, provided they are carefully structured and transparently managed. When borrowed funds are channelled into projects such as highways, railways, ports, and energy systems, they create the backbone for economic growth by improving connectivity, reducing transportation costs, and facilitating trade. Importantly, well-targeted infrastructure projects generate employment during construction and create long-term jobs by stimulating industries that rely on improved logistics and utilities. However, the true benefit lies in sustainability—when loans are managed prudently, with clear repayment plans and transparent terms, they strengthen fiscal credibility and attract further investment.

We, therefore, call on the authorities to take a critical look at the issues raised by the IMF about this loan, especially the concern that the loan could increase Nigeria’s vulnerability to external shocks, similar to what happened in Angola and Senegal, where derivative-backed loans exposed them to repayment crises when commodity prices fell. With Nigeria’s public debt already exceeding $110 billion, this loan’s financing method could undermine debt sustainability. It is, therefore, vital that Nigerian authorities approach the proposed $5 billion loan with both independence and prudence. Nigeria must not simply abandon its development agenda because of the IMF’s concerns. The government has the sovereign right to decide how best to finance its infrastructure needs, but that decision must be informed by a clear-eyed assessment of the risks. Nigeria must demonstrate fiscal discipline and transparency, showing that while it listens to the IMF, it ultimately makes decisions in the best interest of its people and long-term development.