Oil Price Slump Delays Nigeria’s $5 Billion Loan Deal with Aramco
Nigeria’s efforts to secure a $5 billion oil-backed loan from Saudi Arabia’s Aramco have hit a delay due to falling crude oil prices, according to four sources familiar with the matter. This loan, which would be the country’s largest of its kind and Saudi Arabia’s most significant involvement in Nigeria, has raised concerns among banks expected to co-finance the deal. The drop in global oil prices has made the terms less favorable, potentially reducing the size of the facility.
President Bola Tinubu initiated discussions about the loan during a meeting with Saudi Crown Prince Mohammed bin Salman in Riyadh in November 2024. The proposal was part of a broader foreign borrowing plan of $21.5 billion, aimed at supporting Nigeria’s budget. Since then, however, negotiations have slowed, partly due to OPEC+’s recent policy shift focused on regaining market share, which has contributed to a nearly 20% fall in Brent crude—from over $82 to around $65 per barrel.
This price drop complicates Nigeria’s ability to back the loan with oil, as lower prices mean more barrels are required. Years of underinvestment in the sector and production challenges have further strained Nigeria’s ability to meet its targets. The country is already using at least 300,000 barrels per day to repay existing oil-backed loans, with one of those facilities expected to be paid off soon. The proposed Aramco loan would require another 100,000 barrels per day in collateral.
Banks involved in the talks, including Gulf and at least one African lender, are reportedly hesitant due to uncertainty over consistent oil delivery. One source described the situation as difficult, noting that few are willing to underwrite the risk.
While Nigeria’s state oil company NNPC, Aramco, and the ministries of finance and petroleum have all declined to comment, sources say Oando, a Nigerian trading firm, is expected to handle the physical cargoes for the new loan. As oil prices decline, NNPC is also obligated to divert more crude to joint-venture partners, both international and local, to cover operational costs. This further reduces available volumes for loan repayment.
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President Tinubu has taken steps to improve the situation, including issuing an executive order to reduce production costs and increase output. Despite assuming a $75 oil price and daily production of 2 million barrels in its budget, Nigeria produced just under 1.5 million barrels per day in April, according to OPEC’s May report.
