Africa-Press – Nigeria. The International Monetary Fund has warned of risks surrounding Nigeria’s plan to borrow up to $5 billion through a financial derivatives agreement with a local bank, noting that such transactions are often opaque and complex.
The Nigerian Senate approved the agreement in April, joining other African borrowing countries, such as Senegal and Angola, which resorted to similar arrangements last year.
Christian Ebeke, the IMF resident representative in Nigeria, told reporters: “We see that transactions in this type of structure involve risks. They are usually opaque, so the terms are not always transparent when we review these instruments in various countries.”
Ebeke added that Nigeria could instead issue Eurobonds to finance its deficit or turn to other means of raising funds, including on easier terms. Nigeria intends to use the total return swap (TRS) proceeds to refinance its high debt and fund infrastructure projects.
In its latest Article IV review, the IMF praised the comprehensive reforms undertaken by Nigeria, stating that they have bolstered economic stability and investor confidence. However, it warned that the benefits have not yet reached millions of citizens and may diminish due to global shocks, including the conflict in the Middle East.
The fund explained that the reforms initiated since 2023 under President Bola Tinubu—including the removal of fuel subsidies, tightening monetary policy, and liberalizing the exchange rate—have rebuilt reserves and improved macroeconomic management.
Nevertheless, the fund cautioned that these reforms also contribute to exacerbating social pressures, with poverty rates at 63%, and millions facing food insecurity, highlighting the widening gap between overall economic gains and the living reality of households.
The IMF reported that improving policy credibility and foreign exchange market reforms have helped Nigeria regain access to international capital markets and attract foreign direct investment flows while reducing risk premiums. The central bank indicates that total reserves have reached $50 billion, the highest level in 17 years.
However, the IMF warned that reliance on volatile foreign portfolio investments carries extension risks, calling for a shift towards more stable and long-term capital, such as foreign direct investment.
