$5bn UAE loan:Nigeria draws first tranche Despite IMF, S&P concerns

Nigeria has drawn the first tranche of its planned $5 billion financing facility from the United Arab Emirates (UAE) based First Abu Dhabi Bank (FAB).

With the first tranche drawing, Nigeria has moved ahead with the deal despite warnings from the International Monetary Fund (IMF) and S&P Global Ratings over the risks associated with the financing structure.

The facility drawdown marks a significant milestone in President Bola Tinubu’s strategy to secure lower-cost foreign financing to support budget implementation, fund critical infrastructure projects and refinance existing debt at a time when global borrowing costs remain elevated.

The UAE FAB facility is part of the federal government’s broader external borrowing programme and follows approval by the National Assembly for a structured Total Return Swap (TRS) arrangement worth up to $5 billion with First Abu Dhabi Bank, one of the Middle East’s largest financial institutions.

Meanwhile, according to Bloomberg, the financing arrangement is designed to provide Nigeria with access to foreign currency at a lower cost than conventional international borrowing.

The government believes the facility will help ease pressure on public finances by funding key infrastructure projects, supporting budget execution and refinancing more expensive domestic and external debt. Officials also see the arrangement as a way to diversify Nigeria’s funding sources amid tighter global financial conditions.

The first drawdown comes as emerging and frontier markets continue to face higher borrowing costs driven by elevated global interest rates and persistent geopolitical uncertainty.

The financing structure, however, has attracted scrutiny from international financial institutions.

In its recent assessment of Nigeria’s economy, the IMF cautioned against excessive reliance on derivative-based financing arrangements, warning that such instruments are often complex, less transparent and can create hidden fiscal risks