The Nigerian government's plan to secure a $5 billion oil-backed loan from Saudi Arabia's state oil giant, Aramco, has hit a snag due to falling global crude oil prices, according to a report by Reuters.
Citing four sources familiar with the matter, the report said the recent slump in oil prices has raised concerns among banks expected to co-finance the loan, thereby slowing progress on the deal.
If successful, the Aramco arrangement would represent Nigeria’s largest oil-backed loan to date and mark Saudi Arabia’s most significant financial engagement in the country. However, weaker oil prices have reportedly forced stakeholders to reconsider the structure and viability of the deal.
President Bola Tinubu first proposed the loan during a meeting with Saudi Crown Prince Mohammed bin Salman in Riyadh last November, during the Saudi-Africa Summit. Since then, discussions have continued quietly, but with limited progress.
Reuters reports that the slow pace reflects broader market shifts. Brent crude, which traded above $82 per barrel earlier in the year, has since dropped by nearly 20% to about $65. This price drop is largely attributed to OPEC+’s recent strategic shift from cutting supply to regaining market share — a move that has rattled the global oil market.
A lower oil price means Nigeria would have to pledge more crude barrels to secure the same loan amount. But that is complicated by years of underinvestment in the oil sector, which have hampered production capacity.
Nigeria has previously raised about $7 billion through similar oil-for-cash deals, including $3.3 billion from Afreximbank, using forward sales of crude oil. The proposed Aramco deal is part of a broader push by the Tinubu administration to shore up foreign reserves and finance its budget, including a $21.5 billion external borrowing request made last month.
Sources told Reuters that several Gulf banks and at least one African financial institution are involved in the discussions. But banks are reportedly hesitant to proceed due to uncertainty over Nigeria’s ability to consistently deliver crude cargoes to back the loan.
“It’s hard to find anyone to underwrite it,” one source said, highlighting fears over cargo availability and Nigeria’s strained production output.
Both Saudi Aramco and Nigeria’s state oil company, NNPC Ltd, declined to comment on the ongoing negotiations. The federal ministries of finance and petroleum also offered no response.
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