The Federal Government says the primary objective of its $5bn financing facility with First Abu Dhabi Bank is to refinance existing and more expensive debts in order to reduce the country’s borrowing costs.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, disclosed this on Wednesday during a media briefing in Abuja while responding to concerns over the transparency and intended use of the facility.
Oyedele said the transaction, which was approved by the National Assembly, was structured to provide the government with cheaper financing while also supporting infrastructure projects and implementation of the 2026 budget.
“So the objective is to use it to refinance expensive debt so you can save money,” the minister said.
The Federal Government recently accessed the first $1.5bn tranche of the $5bn facility arranged through a Total Return Swap with First Abu Dhabi Bank. The National Assembly approved the facility on March 31, 2026, as part of a broader $6bn external borrowing request by President Bola Tinubu.
The approved package comprises the $5bn First Abu Dhabi Bank facility and a separate $1bn facility from the United Kingdom Export Finance, with the latter earmarked for the rehabilitation and modernisation of the Lagos and Tin Can Island ports. The $5bn facility is intended to support the 2026 budget, infrastructure development and refinancing of existing domestic and external debt obligations.
Oyedele explained that the government was drawing the facility in phases rather than accessing the entire amount at once in order to avoid paying financing costs on funds that had not yet been deployed.
“We’re assessing it in phases. You don’t want to take all the money at once because if you don’t spend it at once, you incur cost on the extra amount you’ve taken,” he said.
The minister said the structure also differed from conventional fixed-rate borrowing because the Abu Dhabi facility carries a flexible interest rate, meaning Nigeria could benefit if market rates decline, although its borrowing cost could rise if rates increase.
“This First Abu Dhabi Bank transaction is flexible rates. It means if rates go up, we pay more. If rates come down, we benefit more.”
According to Oyedele, the all-in cost of the transaction is lower than the cost of Nigeria’s existing debt portfolio, making refinancing an important component of the government’s strategy.
He said Nigeria’s previous Eurobonds, for instance, were issued when interest rates were significantly higher, while the country’s current yield had declined to about seven to 7.5 per cent.
“There’s nothing that says we must always do one thing. And the all-in rate for this transaction is lower than our existing portfolio,” he said.
The minister also rejected calls for the government to publish specific details of how the facility would be spent, arguing that the transaction had received legislative approval and should not be treated differently from other government borrowing.
“We will not publish how we are spending it. We will publish how we spend government money. There’s nothing special about that loan,” Oyedele said.
He added, “Nobody has asked us whether we’re going to publish the money we took from the World Bank, whether we publish the one from Eurobond, whether we publish the one from Sukuk. Why is this one special?”
Oyedele also dismissed suggestions that the borrowing was undertaken without adequate scrutiny, stressing that the facility was presented to and approved by the National Assembly.
“The loan was approved not only by FEC, it was taken to National Assembly because what some people are doing is they comparing with other countries where they did it under the table.”
“What else can be more public than what you gave to the National Assembly?” he added.
The financing arrangement has nevertheless attracted scrutiny from international financial institutions and credit rating agencies because of its Total Return Swap structure.
The International Monetary Fund had warned that such derivative-based financing arrangements could be complex and opaque, with terms that are not always sufficiently transparent. The Fund urged Nigeria to carefully assess the risks associated with the transaction.
Fitch Ratings similarly warned that the facility could increase sovereign debt-management and liquidity risks while reducing transparency in public debt reporting. The rating agency, however, acknowledged that such arrangements could provide hard-currency liquidity and potentially lower borrowing costs.
Nigeria has already drawn $1.5bn from the facility, with the government maintaining that staggered drawdowns would help limit financing costs. The Finance Minister had previously said the facility was meant for “refinancing of expensive debts, financing of infrastructure, as well as budgets.”
Oyedele said the Ministry of Finance and the Debt Management Office would publish frequently asked questions on the transaction to provide further clarification to the public.
“In the next few days, you will see on the website both the Ministry of Finance and DMO the frequently asked questions about this particular debt or bond, just so everybody can please themselves,” he said.
