The Federal Government has explained why it is withdrawing funds gradually from its $5 billion financing agreement with First Abu Dhabi Bank (FAB), saying the approach will help reduce borrowing costs and improve the country’s debt management.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, made the clarification while speaking with journalists after the Federal Executive Council (FEC) meeting held in Abuja.
According to the minister, Nigeria has already received the first $1.5 billion from the financing arrangement, while the remaining amount will be accessed only when needed.
Oyedele explained that the loan was intentionally designed to be released in phases instead of as one lump sum. He said this strategy allows the government to avoid paying interest on money that has not yet been spent.
He noted that if the government collected the full $5 billion at once, interest payments would begin immediately, even if a large portion of the funds remained unused. By drawing only the amount required at a particular time, Nigeria can lower the overall cost of borrowing and manage its finances more efficiently.
The minister added that the phased approach is part of the government’s broader effort to improve financial discipline and ensure that borrowed funds are used responsibly.
Oyedele also dismissed concerns surrounding the loan, stressing that the financing arrangement followed all the necessary legal procedures before it was approved. He said the loan received the approval of the National Assembly, making the process transparent and in line with existing laws.
He explained that the money will serve several important purposes, including refinancing existing expensive debts, funding key infrastructure projects across the country, and supporting the implementation of the 2026 federal budget.
According to him, replacing high-interest debts with cheaper financing will help reduce the government’s debt servicing costs and create more room for investment in critical sectors of the economy.
The finance minister also said there was no need for the government to issue public announcements every time it accesses another portion of the approved facility. He described each drawdown as a normal financial transaction carried out under an already approved loan agreement.
His comments provide the first official confirmation that Nigeria has successfully accessed the initial $1.5 billion from the larger $5 billion financing package with First Abu Dhabi Bank.
The confirmation comes after recent reports suggested that the government had begun using the facility through a financial arrangement known as a Total Return Swap, although officials had not publicly confirmed the development at the time.
The financing deal is expected to support the government’s economic plans by providing funding for critical projects while helping to manage public debt more effectively.
By accessing the loan in stages, the Federal Government believes it can reduce unnecessary interest expenses, improve budget execution, and ensure that borrowed funds are used only when they are required. The approach is also expected to strengthen Nigeria’s overall debt management strategy as the government continues to balance infrastructure development with responsible borrowing.
