A $5 billion crude-for-loan agreement between the Federal Government of Nigeria and Saudi oil giant Aramco has stalled, with negotiations faltering in the wake of falling crude prices and growing uncertainty among participating banks.
According to a Reuters report citing four sources familiar with the matter, the deal initially envisioned as Nigeria’s largest oil-backed loan to date and Aramco’s first of such scale in the country is facing major delays as financiers reassess the risks amid a volatile oil market.
While Nigeria’s Bonny Light crude recently traded at $78 per barrel, global oil prices have seen a sharp decline since January. Brent crude has dropped approximately 20 percent from over $82 to around $65 per barrel triggered by OPEC+’s decision to unwind 2.2 million barrels per day of voluntary production cuts and renewed geopolitical trade tensions, particularly from former U.S. President Donald Trump’s trade rhetoric.
These market shifts have led to hesitation among Gulf banks and at least one African lender expected to co-finance the facility alongside Aramco. “It’s hard to find anyone to underwrite it,” .
The $5 billion loan, which would be collateralized with at least 100,000 barrels of oil per day, was proposed during President Bola Tinubu’s visit to Riyadh for the Saudi-African Summit in November 2024, where discussions began with Saudi Crown Prince Mohammed bin Salman.
Sources say the scale of the loan may now shrink, as lenders reassess risk and Nigeria struggles to meet crude output targets amid years of underinvestment. While the government assumed 2 million barrels per day in its 2025 budget based on a $75 per barrel benchmark, actual production hovered below 1.5 million bpd in April, according to OPEC’s May report.
At present, Nigeria already allocates over 300,000 bpd to service existing oil-backed loans approximately $7 billion in commitments from the past five years. Although one of these facilities is expected to be fully repaid this month, falling oil prices complicate the repayment structure, forcing the Nigerian National Petroleum Company Limited (NNPCL) to divert more barrels toward servicing debt.
Compounding the challenge is Nigeria’s obligation to share barrels with joint-venture partners, including multinationals like Shell and local firms such as Oando and Seplat, further limiting the crude available to back new loans. “You have to either find more oil or renegotiate those deals,” one source said.
Oando is reportedly expected to handle the offtake of physical crude cargoes, although the company declined to comment on the matter.
As discussions drag, NNPCL is working to ramp up production. President Tinubu recently issued an executive order aimed at reducing oil production costs an effort expected to improve margins per barrel and free up more resources for fiscal use.
While Saudi Aramco declined to comment on the negotiations, NNPCL spokesperson Femi Soneye deflected questions, saying, “We are not the government. You can ask the ministry or NUPRC.” Neither the Federal Ministry of Finance nor the Ministry of Petroleum Resources responded to press inquiries.
The stalled Aramco facility is part of a broader $21.5 billion foreign borrowing plan presented by the Tinubu administration to address fiscal gaps and bolster budget support. However, delays in closing this landmark deal reflect the growing complexities Nigeria faces as it seeks fresh funding against a backdrop of fluctuating oil prices, production shortfalls, and investor caution.
