Nigeria's negotiations with Saudi Arabian oil giant Aramco for a $5 billion oil-backed loan have hit a roadblock due to persistent decline in crude oil prices, according to recent reports.
Sources revealed that the delay stems from growing concerns among banks expected to back the deal, as global oil prices continue their downward trend. The facility would represent Nigeria's largest oil-backed loan to date and mark Saudi Arabia's first participation of this scale in the country.
Presidential Initiative Under Pressure
President Bola Tinubu reportedly initiated discussions about the loan during a meeting with Saudi Crown Prince Mohammed bin Salman in Riyadh at the Saudi-African Summit in November last year. However, the recent oil price slump has complicated negotiations and might potentially reduce the size of the deal.
Brent crude has fallen approximately 20 percent to around $65 per barrel from above $82 in January this year. This significant drop is largely attributed to OPEC+ policy shifts aimed at regaining market share rather than curtailing supply.
The lower oil price presents a particular challenge for Nigeria, as it would require committing more barrels to back the loan. However, years of underinvestment in the sector have complicated the country's ability to meet production goals.
Part of Larger Borrowing Plan
This development comes as President Tinubu recently sought approval for $21.5 billion in foreign borrowing last month to bolster the national budget. Reports suggest that the $5 billion oil-backed facility under discussion with Aramco would form part of that larger borrowing plan.
On May 27, Tinubu wrote to Nigeria's National Assembly seeking approval to secure external loans of $21.5 million and ¥15 billion as part of the federal government's proposed 2025–2026 external borrowing plan.
The fresh external borrowing request has sparked reactions amid Nigeria's rising debt profile, which stood at approximately N144 trillion at the end of 2024, according to the Debt Management Office.
Expert Reactions
Reacting to the development on social media platform X, economist Kelvin Emmanuel criticized the approach, stating: "The CME doesn't understand capital formation. And it shows in the choice to structure resource-backed loans to finance budget deficits. He doesn't want to do heavy lifting, and it's straining all the best efforts of the Central Bank."
The outcome of these negotiations remains uncertain as both Nigeria and Saudi Arabia navigate the challenges posed by the volatile global oil market.
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