A planned $5 billion oil-backed loan from Saudi oil giant Aramco to Nigeria has hit a roadblock, following a steep decline in crude oil prices that has unsettled lenders and cast doubt over the viability of the high-stakes deal.
According to a Reuters report, the facility—intended to be Nigeria’s largest oil-collateralised loan to date and Saudi Arabia’s first major venture of this kind in Africa—is facing delays as falling oil prices make banks increasingly cautious. Brent crude has dropped nearly 20% since January, from above $82 per barrel to around $65, driven in part by OPEC+’s recent pivot from output cuts to defending market share.
The proposed deal originated during President Bola Ahmed Tinubu’s meeting with Saudi Crown Prince and Prime Minister Mohammed bin Salman at the Saudi-Africa Summit in Riyadh last November. It was expected to serve as a major fiscal support mechanism within the government’s broader $21.5 billion foreign borrowing plan aimed at financing the national budget.
However, the loan’s structure—backed by daily crude oil allocations—has become riskier under current market conditions. Lower oil prices mean Nigeria would need to commit more barrels to secure the same loan amount, placing further strain on an already burdened production system.
“The challenge now is that it’s hard to find anyone to underwrite it,” a source familiar with the negotiations told Reuters, highlighting concerns over crude availability and the risk of delivery shortfalls. Gulf-based financial institutions and at least one African bank are reportedly involved, but none have been publicly named. Aramco, Nigeria’s NNPC, and officials from the finance and petroleum ministries have all declined to comment.
Historically, Nigeria has relied on oil-backed loans to navigate fiscal shortfalls, with around $7 billion raised through such facilities over the past five years. The proposed Aramco loan, at $5 billion, would require at least 100,000 barrels per day in collateral—this in addition to the approximately 300,000 bpd already earmarked for repaying existing obligations.
While one of Nigeria’s major oil-backed loans is expected to be repaid this month, the country’s repayment timelines remain vulnerable to oil price fluctuations. As the report notes, “a fall in crude prices prolongs the repayment period,” even if the daily repayment volume remains fixed.
Years of underinvestment and operational bottlenecks in Nigeria’s oil sector have hampered production capacity, making it harder for the country to fulfil supply commitments tied to loans. The current situation underscores the urgent need for reforms and diversification in how Nigeria finances its economic ambitions.
As international financiers grow more risk-averse, the fate of the Aramco deal may hinge not just on oil prices, but on Nigeria’s ability to reassure partners of its production stability and long-term economic outlook.
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