The Federal Government’s ambitious plan to secure a $5 billion oil-backed loan from Saudi oil giant Aramco is facing serious setbacks due to falling crude oil prices and concerns from lending banks, according to a new Reuters report that cites four sources familiar with the matter.
The deal, which would mark Nigeria’s largest oil-backed loan to date, was first initiated by President Bola Tinubu in November 2023 during a meeting with Saudi Crown Prince Mohammed bin Salman at the Saudi-African Summit in Riyadh. However, falling global oil prices and doubts about Nigeria’s ability to meet delivery commitments have slowed negotiations.
Brent crude has fallen nearly 20%, dropping from over $82 per barrel in January to around $65, putting strain on the structure of the deal. The fall in prices means Nigeria would need to commit more barrels of oil to back the same loan value — a challenge for a country already burdened with existing oil-backed debt obligations and struggling production.
Banks Raise Concerns Over Oil Supply
The proposed facility involves Aramco as the creditor, with additional funding expected from Gulf banks and at least one African lender. However, discussions have stalled amid concerns from these financial institutions about Nigeria’s reliability in delivering pledged oil cargoes.
“It’s hard to find anyone to underwrite it,” one source reportedly said, citing uncertainties over cargo availability due to underinvestment in production and other operational constraints.
At present, Nigeria uses around 300,000 barrels per day (bpd) to repay previous oil-backed loans, including a $3.3 billion deal with Afreximbank. The new $5 billion Aramco loan would require Nigeria to commit at least 100,000 bpd, further stretching its crude output obligations.
Tinubu’s Broader Borrowing Plan
The Aramco loan is expected to form part of President Tinubu’s $21.5 billion foreign borrowing request, which is aimed at stabilizing Nigeria’s economy, shoring up reserves, and supporting budgetary needs. However, mounting concerns from lenders over oil delivery risks, combined with volatile global oil prices, have complicated efforts to close the deal.
Nigeria National Petroleum Company (NNPC) Limited, Oando, and officials from the Ministries of Finance and Petroleum have all declined to comment on the matter.
Production Challenges Threaten Projections
While Nigeria’s 2025 budget projects crude oil production at 2 million bpd at a benchmark price of $75 per barrel, the World Bank has called this target overambitious, pointing to structural challenges. In April 2025, Nigeria’s actual production stood at just over 1.6 million bpd, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
In response to the challenges, President Tinubu has signed an executive order aimed at reducing oil production costs, while the NNPC continues efforts to boost output. Still, with more crude needed for existing debt repayments and joint-venture agreements with major oil firms like Shell, Seplat, and Oando, Nigeria’s oil room to maneuver remains tight.
Experts say unless prices rebound or production significantly improves, Nigeria may have to either renegotiate its oil-backed loan terms or restructure its borrowing strategy altogether.
