The Federal Government has confirmed the first drawdown of $1.5 billion from its $5 billion financing arrangement with the United Arab Emirates, saying the phased disbursement strategy is designed to reduce borrowing costs while supporting infrastructure development, budget implementation and debt refinancing.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, disclosed this on Monday while speaking to journalists after the Federal Executive Council (FEC) meeting in Abuja.
Oyedele said the financing arrangement with First Abu Dhabi Bank (FAB), which had earlier received approval from the National Assembly, was structured to refinance expensive debts, finance critical infrastructure projects and support the implementation of the Federal Government’s budget.
“The approval for that loan went to the National Assembly, so everybody is aware of it. It’s for refinancing of expensive debts, financing of infrastructure, as well as budgets. So, we don’t want to start making press releases each time we do a drawdown. It is not different from any other loan,” he said.
His remarks constitute the Federal Government’s first official confirmation of the initial drawdown, following reports that Nigeria had begun accessing the facility.
Last week, Bloomberg, citing sources familiar with the transaction, reported that Nigeria had secured approximately $1.5 billion over the previous two weeks through a Total Return Swap with First Abu Dhabi Bank, marking the first utilisation of the broader $5 billion financing package.
Explaining the rationale behind the phased approach, Oyedele said the government deliberately chose to access the facility in tranches rather than withdraw the entire amount at once in order to minimise interest payments and improve debt management efficiency.
According to him, drawing only the amount required at a particular time would prevent the government from paying interest on funds that had not yet been utilised.
“So, the loan is meant to be a drawdown in tranches, and one of the advantages of that is, if you need $5 billion and you take everything at once, you start paying interest, even though you’re not spending all of it now.
“So, this has been structured in a way that makes us even more efficient in the cost of borrowing by taking what we need part time,” he explained.
The financing arrangement forms part of the Federal Government’s broader strategy to manage public debt more efficiently, lower borrowing costs and mobilise resources for infrastructure development and fiscal obligations while maintaining debt sustainability.