Nigeria Faces New Setback in Move to Secure Oil-Backed Loan from Saudi Aramco

• The move by Nigeria to secure an oil-backed loan from Saudi Arabia’s Saudi Aramco has suffered a setback
• The $5 billion oil-backed facility is currently facing hurdles due to declining crude oil prices in the international markets
• Sources disclosed that talks have slowed as the banks, which are expected to finance the deal, have raised concerns over the crude oil price crash

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.

Nigeria and Saudi Aramco are facing challenges in finalising a $5 billion loan.

Reuters reported that the challenges follow the recent crash in crude oil prices, which has raised concerns among banks, which are expected to fund the deal.

Tinubu initiates crude oil-backed loan

Reuters quotes sources as saying that the loan would be the West African country’s largest oil-backed loan to date and Saudi Arabia’s first important involvement in such a deal with the country.

However, they disclosed that declining oil prices might slash the size of the deal.

The sources reportedly said that President Bola Tinubu initiated the loan idea in November 2024 during a meeting with Saudi Arabia’s crown prince, Mohammed bin Salman, at the Saudi-African Summit in Riyadh.

Slow progress in the talks shows the impact of the recent drop in oil prices, caused by the OPEC+ policy changes to regain market control instead of restricting supply.

Crude oil prices face fresh volatility

Data shows that Brent fell about 20% to around $65 per barrel from above $82 in January.

Oil prices have shown an uptick recently as the US and China make progress in their tariff talks and OPEC+ members halt the proposed output increases.

Lower oil prices mean Nigeria will need to pump more oil to back the loan. However, experts say years of under-investment are causing a major hurdle in the country’s ability to meet production targets.

In May, Tinubu sought lawmakers’ approval to borrow $21.5 billion to support the budget, with the $5 billion oil-backed loan expected to be part of the amount.

Nigeria may need to pump more oil

Sources familiar with the deal told Reuters that banks involved in the talks have expressed concerns about oil delivery, which has slowed negotiations.

According to them, Gulf banks and one African financial institution are involved in the deal.

Nigeria has a history of getting and repaying oil-backed facilities to support its budget, boost FX reserves, or rehabilitate state-owned refineries.

Reports say Saudi Aramco will need about 100,000 barrels daily of oil from Nigeria as collateral for the $5 billion loan.

“However, it would almost double the roughly $7 billion of oil-backed loans taken in the last five years,” the report reads.

NNPC enters into oil-backed deals

It said that Nigeria is currently using 300,000 barrels per day to offset other NNPC’s oil-backed deals, with one facility expected to be fully repaid this month.

The Nigerian National Petroleum Company Limited (NNPC) have been forced by lower prices to allocate more crude to joint-venture partners, from international oil majors to local producers.

Legit.ng reported that the state-owned oil company, NNPC, has several oil-backed loans, including a $3 billion deal from the Afreximbank to support the naira and stabilise the FX market.

World Bank slashes Nigeria’s loan requests

Legit.ng earlier reported that the Nigerian government might lose $4 million from a World Bank loan after failing to meet auditing standards on essential revenue reforms covering the Federal Inland Revenue Service and the Nigeria Customs Service.

The loan is part of the $103 million Fiscal Governance and Institutions Project, a public financial management initiative funded via a credit facility from the bank’s International Development Association (IDA).

The World Bank’s restructuring paper, dated June 2025, disclosed that the revenue assurance audit, which covers the Federal Inland Revenue Service (FIRS) and Customs, was adjudged as not achieved because the reports failed international auditing standards.

Proofreading by Kola Muhammed, copy editor at Legit.ng.

Source: Legit.ng