Nigeria and Saudi Aramco’s $5bn Oil-Backed Loan Stalls Amid Crude Price Drop

Nigeria and Saudi Aramco are facing major hurdles in finalizing a landmark $5 billion oil-backed loan, as falling global crude prices trigger concern among banks expected to underwrite the deal. Originally envisioned as Nigeria’s largest oil-backed facility and Aramco’s first major financial venture in West Africa, the agreement has been stalled by economic uncertainties. A sharp dip in Brent crude prices, now hovering around $65 per barrel from over $82 in January, has made financiers wary about Nigeria’s ability to meet repayment commitments based on crude shipments.

The idea for the loan emerged during a high-profile meeting between Nigerian President Bola Tinubu and Saudi Crown Prince Mohammed bin Salman at the Saudi-African Summit in Riyadh in late 2023. But negotiations have slowed, largely due to changes in OPEC+ strategy that prioritize market share over production cuts—leading to price volatility. The economic ripple effects of this strategy have thrown doubt on Nigeria’s oil revenue projections and fiscal sustainability.

Nigeria’s growing reliance on foreign loans to support its budget has added to concerns. Tinubu recently sought legislative approval for $21.5 billion in external borrowing, with the Aramco loan expected to play a key role. However, banks—particularly Gulf and African lenders—are worried about Nigeria’s crude supply commitments. The proposed deal requires a daily shipment of at least 100,000 barrels of crude, yet Nigeria is already using around 300,000 barrels daily to service existing oil-backed debts.

Compounding the challenge is Nigeria’s declining oil output. Though the country budgeted for 2 million barrels per day at $75 per barrel, actual production in April was just 1.5 million, according to OPEC. Infrastructure issues like pipeline vandalism, underinvestment, and crude theft continue to plague the sector. In an attempt to improve conditions, Tinubu recently signed an executive order to cut production costs, but progress has been slow.

For Saudi Aramco, this deal is more than just a loan—it marks a strategic step toward expanding its presence in Africa’s energy market. If the deal materializes, it would signify the largest Saudi financial stake in Nigeria to date, potentially opening the door for broader partnerships. Still, with crude prices low and oil revenues uncertain, both nations face pressure to either renegotiate the terms or delay the project until market conditions improve.

Source: Business day