Talks on $5B Oil Loan With Aramco Slow Down
Discussions between Nigeria and Saudi Aramco over a $5 billion oil-backed loan have stalled as falling crude prices complicate negotiations.
Reuters reports that the drop in global oil prices has made it harder for both sides to agree on terms for what would be Nigeria’s largest such deal and Aramco’s first major financing move in the country.
“It’s hard to find anyone to underwrite it,” said one source familiar with the talks.
The delay comes at a critical time, as Nigeria seeks foreign loans to support its 2025 budget amid rising fiscal pressures and limited revenue sources.
Oil Price Drop Puts Pressure on Deal
Oil prices have fallen by about 20% , with Brent crude now trading around $65 per barrel , down from over $82 in January .
This decline follows an OPEC+ decision to increase output gradually—adding 410,000 barrels per month through July 2025.
Eight member countries, including Saudi Arabia, agreed to ease voluntary production cuts totaling 2.2 million barrels per day , leading to oversupply concerns and weaker pricing.
With oil at lower levels, Nigeria must offer more barrels to secure the same loan amount, making the deal less attractive to lenders.
Loan Would Be Tied to Physical Oil Deliveries
Under the proposed agreement, Nigeria would repay the loan using physical crude deliveries —a common practice in oil-backed financing.
Aramco would receive at least 100,000 barrels of crude per day as repayment, sources say.
However, current oil production stands at just 1.4 million barrels per day , with condensate adding another 200,000 bpd .
This makes it difficult for Nigeria to commit large volumes without risking delays or defaults.
In addition, the state-owned NNPCL must also supply crude to international oil companies like Shell , as well as local producers such as Oando and Seplat , to cover operational costs.
“You have to either find more oil or renegotiate those deals,” a source explained.
Challenges From Past Underinvestment
Years of underinvestment in Nigeria’s oil sector have left infrastructure outdated and production inconsistent.
These issues make it harder to meet delivery targets, especially when trying to back a new $5 billion facility while still servicing older loans.
Currently, 300,000 barrels per day are already allocated to repaying existing oil-backed loans, some of which will expire this month.
But with prices lower than expected, these repayments take longer, tying up even more of Nigeria’s limited output.
Part of Larger Foreign Borrowing Push
The Aramco-backed loan forms part of President Bola Tinubu’s broader plan to raise $21.5 billion in foreign loans to fund the national budget.
Tinubu first raised the idea during his meeting with Saudi Crown Prince Mohammed bin Salman at the Saudi-African Summit in November 2024 .
Despite the slow progress, Nigeria remains committed to using oil-backed loans as a tool for:
- Supporting government spending
- Boosting foreign reserves
- Funding refinery upgrades
But experts warn that without increased production and stable pricing, future deals may face similar hurdles.
Banks Hesitant Over Delivery Risks
Several banks involved in the talks—including Gulf banks and at least one African lender —have expressed doubts about Nigeria’s ability to consistently deliver crude oil.
One concern is whether Oando , the company expected to manage crude offtake, can handle logistics smoothly amid ongoing production constraints.
Aramco and Nigerian officials have not publicly commented on the status of the deal.
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