…Says Nation’s Poverty Level Now 63%
The International Monetary Fund (IMF) has cautioned the Nigerian government on the potential risks of borrowing $5 billion through a derivatives agreement with First Abu Dhabi Bank due to what it termed the opacity and usually complex nature of such transactions.
A news report from Reuters indicated that the Fund’s concerns were contained in comments by its Nigeria mission chief, Dr. Christian Ebeke, during a briefing on the Fund’s latest Article IV consultation, which acknowledged the country’s recent economic reforms for improving macroeconomic stability and investor confidence.
Commenting on the deal to refinance expensive debt and pay for infrastructure with the UAE lender, which was approved by Nigeria’s Senate, the development finance expert said: “Our view is that the transaction in these types of structures carry risks. Usually, they are opaque so the terms are not always very transparent when we reviewed these instruments across countries.”
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Ebeke maintained that rather than exploring the borrowing option from First Abu Dhabi Bank the Nigerian government could instead issue eurobonds to finance its deficits or other means to raise funding, including on concessional terms.
In its latest Article IV review, the Fund commended the ongoing reforms of the Federal Government of Nigeria for strengthening the nation’s economic stability and boosting investor confidence.
It, however, warned that the benefits had yet to reach millions of citizens and could be undermined by global shocks, including the Middle East conflict just as the reforms were also contributing to social strain, with poverty levels at 63% and millions of Nigerians contending with food insecurity, underscoring a widening gap between macro gains and household realities.
The IMF pointed out that improved policy credibility and forex reforms had helped Nigeria regain access to international capital markets and attract portfolio inflows, while reducing risk premiums as the CBN reported that Nigeria’s gross reserves had surpassed $50 billion as of the first week of June this year, the highest in 17 years.
The Breton Woods development finance institution reported that reliance on volatile foreign portfolio investment posed rollover risks, urging a shift towards more stable, long-term capital such as foreign direct investment.
According to the Fund, the Federal Government’s economic reforms since 2023 have improved policy credibility as foreign exchange reforms have helped restore investor confidence, Nigeria has regained access to international capital markets, portfolio investment inflows to the economy have improved over the past years.
It noted that global shocks, including the ongoing Middle East conflict, could undermine reform gains by increasing inflationary pressures and fiscal risks as the conflict has contributed to volatility in global energy markets and heightened uncertainty over commodity prices, creating both opportunities and risks for oil-exporting economies such as Nigeria.
The IMF further clarified: “Strong reforms over the past three years have yielded improved macroeconomic outcomes and built resilience. Still, conditions for many Nigerians remain difficult. Poverty reached 63 percent (national poverty line) and 27 million Nigerians are estimated to have faced food insecurity in the fall of 2025.”
The IMF warned that while higher costs of food, fertiliser and fuel could boost Nigeria’s revenues, they could also intensify inflationary pressures on poor households, “potentially aggravating poverty and food insecurity”.
The latest World Bank report reflected that Nigeria’s poverty level had been on the rise for years, with about 61 percent of the country’s population living in poverty in 2025, up from 40 percent in 2019.
The IMF’s warning reflects concerns about the growing use of structured sovereign financing arrangements across emerging and frontier markets. Unlike traditional sovereign bonds, derivative-based transactions can involve complex contractual terms, contingent liabilities, and repayment structures that may not be immediately visible to investors or policymakers.
