Experts divided over benefits of £746m UK export finance deal for Nigeria

•‘Unstable FX regime threatens Apapa, Tin-Can port upgrade gains’

Divergent views have emerged among economists and policy analysts over the real benefits of the £746 million export finance guarantee extended by the United Kingdom to Nigeria for the rehabilitation of key port infrastructure in Lagos.

The facility, backed by UK Export Finance (UKEF), will fund the upgrade of the Lagos Port Complex in Apapa and the Tin Can Island Port in partnership with the Nigerian Ports Authority (NPA) and the Federal Ministry of Finance.

While government officials and some stakeholders have described the deal as transformative, others have raised concerns about its long-term implications for Nigeria’s economy, particularly regarding debt exposure and the distribution of benefits.

Under the agreement, at least £236 million of the financing will be channelled to British firms, with British Steel securing a £70 million contract to supply 120,000 tonnes of steel for the project.

UK Business and Trade Secretary, Peter Kyle, described the deal as a major boost for UK manufacturing and bilateral relations, noting that it would support jobs and economic growth in the United Kingdom.

Similarly, the Chief Executive of UKEF, Tim Reid, said the transaction underscores the agency’s role in facilitating global trade while supporting sustainable growth in partner countries.

On the Nigerian side, Minister of Marine and Blue Economy, Adegboyega Oyetola, said the port modernisation aligns with the Federal Government’s strategy to unlock the marine sector’s potential. He noted that improved infrastructure and automation would reduce cargo dwell time, lower logistics costs, and enhance Nigeria’s competitiveness as a regional maritime hub.

Despite these assurances, some analysts argue that the deal primarily serves UK economic interests. This view gained traction following a post by UK Prime Minister Keir Starmer on his verified X account, highlighting the deal’s role in supporting British industry and safeguarding jobs.

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A former Head of Research at Financial Derivatives Company and founder of ACPAE Consulting, Izuchukwu Clement Igboanugo, criticised the arrangement, suggesting Nigeria may not be extracting optimal value.

“This is the reality of the UK deal that most of us have known all along; the rest of the story is noise,” he said, arguing that such agreements are often driven by the UK’s domestic economic priorities.

According to him, “It is the UK that would have come to Nigeria, just as it went to India and China to secure deals aimed at stabilising its economy. In our case, however, we move the entire Aso Rock to the UK simply to help them achieve their objectives.”

He also questioned Nigeria’s broader negotiation strategy, citing what he described as imbalances in educational and economic partnerships.

In contrast, Professor Sheriffdeen Adewale Tella of Olabisi Onabanjo University maintained that the benefits to Nigeria would ultimately depend on how the contracts are structured and implemented.

“Whether they come or we go, Nigeria has to champion the business deals,” he said.

Tella emphasised the importance of embedding strong local content provisions in the agreement, including technology transfer, joint ventures with Nigerian firms, and procurement policies that prioritise local suppliers. He added that capacity building, skills development, and training programmes should be integral to the contract framework to ensure long-term value for the domestic economy.

The financing will be delivered through UKEF’s Buyer Credit Facility, coordinated by Citibank N.A. London Branch, marking one of the largest export credit-supported infrastructure deals in West Africa.

Analysts note that while such facilities provide access to long-term funding on relatively favourable terms, they often come with tied procurement conditions that benefit the lending country’s industries.

The deal was signed during a high-level engagement involving Keir Starmer and Nigerian President Bola Tinubu, signalling renewed commitment to strengthening bilateral trade and investment ties. A Memorandum of Understanding is also expected to deepen future collaboration in infrastructure and trade financing.

Economic observers say the project has the potential to significantly improve port efficiency in Nigeria, where congestion and delays have long hindered trade. However, they caution that the ultimate benefits will depend on execution, transparency, and Nigeria’s ability to leverage the deal for broader industrial development.

With global competition for infrastructure financing intensifying, the UK–Nigeria agreement highlights both the opportunities and trade-offs inherent in such partnerships. As implementation begins, attention is expected to shift to how effectively the project delivers on its promise of modernising Nigeria’s ports while ensuring that local industries and the broader economy derive meaningful and lasting benefits.

Meanwhile, the Sea Empowerment Research Center (SEREC) at the weekend said that weak and unstable foreign exchange regime may mar the gains of the landmark £746million Apapa and Tin-Can Port upgrade deal reached between the Federal Government and the UK Export Finance (UKEF).

In a statement released by SEREC Head of Research, Fwdr. Eugene Nweke at the weekend, while the port rehabilitation financing arrangement with the United Kingdom provides access to critical infrastructure funding, it introduces significant foreign exchange (FX) exposure, limited domestic value retention, and structural fiscal risks to the Nigerian economy.

According to the SEREC statement, “Nigeria’s recent port rehabilitation financing arrangement with the United Kingdom, supported by UK Export Finance, reflects a conventional export credit financing model widely used in global trade. While the deal provides access to critical infrastructure funding, it introduces significant foreign exchange (FX) exposure, limited domestic value retention, and structural fiscal risks.

“This advisory paper finds that the core vulnerability is not the financing structure itself, but Nigeria’s weak and inconsistent FX management regime, which could convert a strategic infrastructure investment into a long-term macroeconomic burden.

“Key structural features of the arrangement include Loan guarantees by UK Export Finance; Conditional procurement (minimum UK sourcing thresholds); and significant allocation to UK-based suppliers, including industrial materials.

“This structure aligns with global Export Credit Agency (ECA) practices but carries distinct implications for developing economies with fragile FX systems like Nigeria.

“Key Policy Issues Identified include tied financing and limited domestic multiplier. A notable portion of the loan is contractually tied to UK suppliers, resulting in reduced participation of Nigerian firms, limited technology transfer depth, and Immediate capital outflows to the lender’s economy.

“In the area of foreign exchange exposure and currency mismatch, Nigeria’s borrowing in pounds sterling introduces currency mismatch risk (earnings largely in USD); exposure to exchange rate volatility; and increased debt servicing burden under Naira depreciation. “

On possible way forward, the research institute explained that it recommends a policy recalibration anchored on FX risk mitigation, enhanced local content integration, customs revenue optimisation, and transparent loan governance.

“Nigeria needs to introduce currency hedging instruments for external loans, establish FX buffer accounts tied to project revenues, and diversify currency exposure in sovereign borrowing.

“The Nigeria–UK port financing arrangement represents a strategically significant but structurally sensitive engagement. While it offers much-needed infrastructure development, its success is contingent upon Nigeria’s ability to manage foreign exchange risks, strengthen institutional capacity, and ensure policy coherence.

“Without these safeguards, such agreements risk becoming channels of economic leakage rather than instruments of national development.

“Nigeria must transition from passive participation in externally driven financing arrangements to a strategically coordinated model that integrates infrastructure development with foreign exchange stability, domestic industrial growth, and institutional accountability.”