The $5billion oil backed loan deal the Nigerian government entered with Saudi Arabia’s oil giant, Aramco, is being threatened by Nigeria’s declining oil price.
Resultantly, 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.
Last month, Tinubu 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 history 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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