Nigeria’s $5 Billion Oil-Backed Loan Deal with Aramco Delayed

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Nigeria’s ambitious plan to secure a $5 billion oil-backed loan from Saudi Arabia’s Aramco is facing delays, as falling oil prices raise red flags among potential financiers, according to four sources familiar with the talks.

If successful, this would mark Nigeria’s largest oil-backed loan and Aramco’s biggest lending involvement in the country to date. However, the recent drop in global oil prices—triggered in part by OPEC+’s shift toward market share expansion over production cuts—has shaken confidence among supporting banks, potentially scaling down the deal’s size.

Loan First Discussed Between Tinubu and MBS

The idea for the facility was reportedly initiated by President Bola Tinubu during a meeting with Saudi Crown Prince Mohammed bin Salman at the Saudi-African Summit in Riyadh last November. Until now, details of this negotiation had not been publicly disclosed.

Brent crude prices have plunged nearly 20%, falling from over $82 per barrel in January to around $65 per barrel. This decline means Nigeria would need to pledge more oil to meet the loan terms—an increasingly difficult prospect given the country’s production challenges and years of underinvestment in the sector.

Banks Grow Hesitant Amid Oil Delivery Concerns

Sources say discussions have slowed primarily due to concerns from the banks expected to co-fund the loan alongside Aramco. These concerns center on Nigeria’s ability to consistently deliver the necessary crude volumes. Gulf-based banks and at least one African lender are reportedly involved, although their identities remain undisclosed.

“It’s hard to find anyone to underwrite it,” one source noted, pointing to fears over cargo availability.

Neither Saudi Aramco nor Nigeria’s state oil firm NNPC responded to requests for comment. The Nigerian finance and petroleum ministries also declined to comment.

Existing Oil Commitments Pose a Challenge

Currently, Nigeria is using an estimated 300,000 barrels per day (bpd) to repay existing oil-backed loans, one of which is expected to be fully repaid this month. Adding a new loan backed by at least 100,000 bpd, as proposed with Aramco, would stretch production even thinner.

When oil prices fall, repayment timelines lengthen since more barrels are needed to cover the same loan value. Additionally, the NNPC must allocate more crude to its joint venture partners—including major firms like Shell and local producers like Oando and Seplat—to meet operational cost obligations.

“You have to either find more oil, or find a way to renegotiate those deals,” one source added.

Efforts to Increase Output and Cut Costs

To ease the pressure, President Tinubu has issued an executive order aimed at reducing production costs, freeing up more funds per barrel for the government. Meanwhile, NNPC is ramping up efforts to boost oil output.

Oando, a Nigerian oil trading firm, is expected to manage the physical offtake of the cargoes for this deal, sources say, though the company has not provided a public statement.

Budget Assumptions vs Reality

Nigeria’s 2025 budget is based on crude oil priced at $75 per barrel and production of 2 million bpd. However, according to the May OPEC market report, actual output in April stood at just under 1.5 million bpd—highlighting the widening gap between expectations and reality.

As Nigeria looks to strengthen its fiscal position, the success—or failure—of this high-stakes loan agreement could have significant implications for the country’s financial outlook and oil sector stability.

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