BY BONNY AMADI
The Nigerian government on Wednesday said that no final decision has been reached regarding an oil-backed loan between Nigeria and Aramco, the Saudi Arabian state-owned oil company.
Prior to the Aramco deal, Nigeria has a history of taking oil-backed loans, most notably from institutions like Afreximbank and international lenders. Some of the earlier deals include the major oil-backed loan, the $3 billion crude-for-cash agreement with international traders in 2020, which allowed Nigeria to exchange crude oil for immediate cash flow to fund government expenses.
Also, another major oil-backed loan was the $1.5 billion loan from Afreximbank in 2021, which was backed by crude oil and aimed at stabilising Nigeria’s economy and foreign exchange reserves.
It also includes a $3.3 billion loan from the African Export-Import Bank (Afreximbank), obtained in August 2023.
Meanwhile, Nigeria and Aramco are reportedly facing difficulties in finalising the record $5 billion oil-backed loan following the recent drop in crude prices, which has raised concerns among banks expected to support the deal.
In a statement on Wednesday by Mohammed Manga, the director of information and public relations at the ministry of finance, said claims predicting the failure of such initiatives lack a solid foundation.
Manga said market speculation is a common occurrence during periods of economic reforms and transactions.
“The Federal Government of Nigeria is aware of recent media reports concerning a potential forward sale of crude oil involving the Nigerian National Petroleum Company Limited (NNPC Ltd),” the statement reads.
“While market speculation is not uncommon in the context of ongoing economic reforms and transactions, no final decision has been announced by the Government, and commentary suggesting the collapse of any such initiative is un- founded.”
Manga said the government remains focused on deploying a range of innovative, transparent, and fiscally responsible financing strategies to optimise Nigeria’s oil assets, improve external liquidity, and strengthen macroeconomic stability.
The NNPC has secured several oil-backed loans, including a $3 billion loan from the African Export Import Bank (Afreximbank) to support the naira and stabilise the foreign exchange (FX) market.
It will be recalled that on Tuesday, it was reported that the FG’s $5bn Oil-Backed Loan Deal with Aramco is being threatened by Nigeria’s Oil Price Slump, which has made participating banks panicky.
The report sounded that Nigeria and Saudi Arabia’s oil giant, Aramco, are facing challenges in finalising a landmark $5 billion oil-backed loan, as a recent downturn in crude prices raises concerns among banks expected to support the deal, according to four sources cited by Reuters.
The facility, which would be Nigeria’s largest oil-backed loan to date and Saudi Arabia’s most significant financial engagement in the country, is now at risk of being downsized due to the decline in oil prices, sources revealed.
President Bola Tinubu initially proposed the loan during his meeting with Saudi Crown Prince Mohammed bin Salman at the Saudi-African Summit in Riyadh last November. While discussions have continued, details of the negotiations had not been publicly disclosed until now.
The sluggish progress reflects the broader impact of falling oil prices, largely influenced by OPEC+ policy shifts aimed at regaining market share rather than restricting supply.
Brent crude has dropped nearly 20%, slipping from over $82 per barrel in January to around $65 per barrel.
This decline may require Nigeria to commit more oil barrels to secure the loan, but long-standing underinvestment in the sector has made meeting production targets increasingly difficult.
In May, Nigerian president sought approval for $21.5 billion in foreign borrowing to strengthen Nigeria’s budget, with the proposed $5 billion oil-backed loan from Aramco positioned as a key component of that financial strategy, according to sources.
Banks in talks to co-finance part of the loan with Aramco have raised concerns over oil delivery delays, slowing negotiations, sources said. The discussions involve Gulf lenders and at least one African bank, though Reuters could not confirm their identities.
“It’s hard to find anyone to underwrite it,” one source said, citing concerns over the availability of the cargoes.
Nigeria has a long his- tory of securing and repaying oil-backed loans, which it typically uses to bolster budget support, shore up foreign reserves, or overhaul state-owned refineries.
Sources say that the proposed $5 billion loan from Aramco would be backed by at least 100,000 barrels of oil per day. However, this new loan would almost double the total oil-backed loans—approximately $7 billion—that Nigeria has taken in the past five years.
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