Nigeria’s latest borrowing arrangement with First Abu Dhabi Bank (FAB) is emerging as one of the most closely watched components of President Bola Tinubu’s debt strategy, after the Federal Government confirmed that it will not publish a transaction-specific breakdown of how funds drawn from the $5 billion facility will be deployed.

The disclosure has intensified criticism from former Vice-President Atiku Abubakar, who has demanded greater transparency, arguing that Nigerians—and future generations—will ultimately bear the cost of the borrowing.

Finance Minister and Coordinating Minister of the Economy, Taiwo Oyedele, confirmed the government’s position during a media briefing in Abuja. He said there was no justification for treating the FAB facility differently from other government financing sources, stressing that the transaction had undergone the required approval process, including consideration by the National Assembly.

Nigeria has already accessed approximately $1.5 billion, representing the first tranche of the $5 billion Total Return Swap (TRS) arrangement with FAB. The facility forms part of a broader external borrowing programme approved by lawmakers.

But beneath the headline figure lies a more complicated financial structure—and this is where the controversy begins.

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Oyedele’s statement that the government will not publish a specific breakdown of how the FAB proceeds are spent has raised questions about the level of accountability attached to a borrowing arrangement that will ultimately be serviced by public revenue.

The minister argued that the government would continue to publish information on government expenditure generally and questioned why the FAB facility should attract special disclosure requirements compared with other borrowing instruments such as Eurobonds, World Bank loans or Sukuk.

The government maintains that the principal objective of the facility is to refinance more expensive existing obligations and reduce overall financing costs.

Oyedele explained that much of Nigeria’s existing debt was contracted when interest rates were considerably higher. The FAB arrangement, by contrast, carries a flexible interest rate, meaning Nigeria could benefit if benchmark rates decline but would face higher financing costs if rates rise.

That explanation provides an economic rationale for the transaction.

But it does not eliminate the transparency question.

If the facility is primarily intended to refinance expensive debt, Nigerians should be able to determine which obligations are being refinanced, at what cost, what savings are expected and what risks have been transferred to the public balance sheet.

Under the arrangement, Nigeria receives foreign-currency financing while pledging naira-denominated government securities as collateral.

The collateral requirement is approximately 133.3 percent of the amount drawn.

That means a $5 billion facility would involve securities worth substantially more than the cash received.

For the first tranche, reports indicate that Nigeria is providing collateral at the same 133.3 percent ratio.

This is one of the features that has attracted scrutiny from international financial institutions and ratings agencies.

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The issue is not simply how much Nigeria borrowed.

It is what Nigeria has pledged, how the collateral is valued, what happens if market conditions move against the country and whether the full economic exposure is adequately reflected in public debt reporting.

IMF warning: complexity can create hidden risks

The International Monetary Fund has already expressed concern about Nigeria’s use of the derivative-based financing structure.

The IMF said transactions of this type carry risks and noted that Nigeria has other financing options, including conventional Eurobonds and concessional multilateral borrowing.

Reuters reported that the IMF had raised concerns about the potentially opaque and complex nature of such arrangements.

The concern is particularly relevant because derivatives can produce financial obligations that are more difficult for the public to understand than traditional sovereign borrowing.

A conventional loan generally presents a relatively straightforward picture: principal, interest rate, maturity and repayment schedule.

A Total Return Swap can involve collateral requirements, valuation changes, margin calls and exposure to movements in interest rates, bond prices, exchange rates and other market variables.

Fitch flags another vulnerability

Global ratings agency Fitch Ratings has also warned about the arrangement.

Fitch said Nigeria’s $5 billion TRS could create additional debt-management and liquidity risks, while raising transparency concerns and increasing exposure to market shocks. It also warned that the structure could complicate recovery prospects for conventional creditors if Nigeria encountered financial distress.

If the naira weakens significantly or domestic bond yields rise, the value and adequacy of the pledged securities could become a more complicated issue.

Analysts have warned that dollar-denominated margin requirements against naira collateral could potentially generate additional foreign-exchange pressure during periods of market stress.

This creates a potential vulnerability: the same economic conditions that make Nigeria’s finances more difficult could also increase the pressure associated with a derivative-based financing structure.

The collateral question

The 133.3 per cent collateral requirement deserves particular attention. Why must Nigeria pledge securities worth significantly more than the cash it receives?

The answer lies in protecting the lender against movements in the value of the underlying collateral and other risks associated with the transaction.

The public deserves to know the precise terms governing margin calls, collateral substitution, valuation, default and early termination.

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Atiku turns the issue into a political accountability battle

It is against this background that Atiku has accused the Tinubu administration of inadequate transparency in its borrowing programme.

The former vice-president argues that the government has a duty to explain every loan contracted in the name of Nigerians because citizens—not government officials—will ultimately finance repayment.

Atiku has also criticised the administration’s broader debt accumulation, arguing that increased borrowing has not translated into a corresponding improvement in Nigerians’ living standards.

His office cited Debt Management Office figures and claimed that the Tinubu administration had added about N72 trillion to the country’s debt stock, taking total indebtedness to approximately N159.35 trillion in early 2026.

The claims about poverty levels and the exact attribution of changes in national debt require careful examination against official datasets, particularly because debt figures can change depending on the reporting period, exchange rates and whether domestic and external obligations are being measured on the same basis.

Oyedele has said the transaction is primarily designed to refinance expensive debt and reduce the government’s overall financing cost.

The debt burden beyond Tinubu

Ultimately, the Abu Dhabi facility is bigger than President Tinubu, Atiku Abubakar or Finance Minister Taiwo Oyedele.

Nigeria therefore faces a simple transparency test: if the $5 billion facility is as economically beneficial as the government says, publishing enough information for independent experts to verify that claim should strengthen—not weaken—the government’s case.

For a country already carrying a substantial debt burden, Nigerians cannot afford to discover the true cost of today’s borrowing only when tomorrow’s bills arrive.