By Ayomide Otitoju
Talks between Nigeria and Saudi Arabia’s state-owned oil giant, Aramco, over a proposed $5 billion oil-backed loan have reportedly stalled, as falling crude prices threaten the size and feasibility of the deal.
According to a Reuters report citing four unnamed sources familiar with the negotiations, the slump in oil prices has cast uncertainty over the terms of the facility, which would mark Nigeria’s largest oil-backed loan to date and Aramco’s most significant financial involvement in the country.
The facility was initiated by President Bola Tinubu during his November 2024 meeting with Saudi Crown Prince Mohammed bin Salman at the Saudi-African Summit in Riyadh. It forms part of a broader foreign borrowing plan under which Tinubu recently sought $21.5 billion in new financing to bolster Nigeria’s budget and foreign reserves.
However, the discussions have made little headway in recent weeks. Sources attributed the delays to both volatile oil market conditions and logistical concerns over Nigeria’s ability to guarantee consistent oil deliveries to back the loan. “It’s hard to find anyone to underwrite it,” one source reportedly said, citing skepticism among participating banks about Nigeria’s ability to provide sufficient oil cargoes.
Brent crude prices have fallen sharply—from over $82 per barrel in January to about $65 currently—due to OPEC+ decisions to relax voluntary output cuts and broader concerns about global demand, particularly in the face of renewed U.S. trade tensions.
Eight OPEC+ member countries, including Saudi Arabia, had agreed to unwind cuts amounting to 2.2 million barrels per day through July, further exerting downward pressure on prices. As a result, Nigeria, which currently produces about 1.4 million barrels per day (plus 200,000 bpd of condensates), may need to allocate more barrels to secure the loan—something complicated by years of underinvestment and falling output.
At least 100,000 bpd would be required to back the Aramco facility, sources noted. That would nearly double the roughly $7 billion in oil-backed borrowing Nigeria has undertaken over the past five years.
Oando is expected to manage the offtake of physical cargoes for the loan, while Gulf banks and one African lender have reportedly been approached to co-fund the deal. However, fears over delivery reliability have raised doubts among financiers.
So far, neither Aramco nor Nigeria’s state oil company, NNPCL, have commented on the stalled negotiations. Officials from the finance and petroleum ministries have also remained silent.
NNPCL is already using up to 300,000 bpd to service other oil-backed loans, though one of those facilities is expected to be fully repaid this month. Still, with fixed repayment volumes and declining oil prices, Nigeria faces a slower pace of loan servicing, requiring more crude to meet obligations.
Lower prices also reduce the share of crude retained by NNPCL after fulfilling cost recovery commitments to joint-venture partners, including Shell, Oando, and Seplat.
“You have to either find more oil or renegotiate those deals,” one source said, highlighting the mounting pressure on Nigeria’s oil-reliant fiscal strategy.
