The Federal Government’s bid to secure a $5 billion oil-backed loan from Saudi energy giant Aramco is facing major hurdles, as falling global crude prices rattle investor confidence.
A report by Reuters, citing four sources close to the deal, reveals that the steep drop in oil prices has triggered concerns among banks expected to co-finance the loan. If completed, the deal would represent Nigeria’s largest oil-backed loan to date—and the first involving Saudi Arabia. However, with Brent crude prices plunging nearly 20%, from over $82 per barrel in January to about $65 recently, the outlook for the agreement has dimmed.
President Bola Tinubu reportedly introduced the proposal during talks with Saudi Crown Prince Mohammed bin Salman at the Saudi-Africa Summit in Riyadh last November. While negotiations are ongoing, sources say momentum has slowed due to market volatility and doubts over Nigeria’s oil production capacity.
To secure the loan, Nigeria would need to commit at least 100,000 barrels of crude per day. But years of underinvestment in the oil sector have made it difficult to meet such targets. Currently, Nigeria already allocates around 300,000 barrels daily to service existing oil-backed loans—one of which is due for repayment this month.
Industry experts warn that falling crude prices extend the repayment period of oil-backed loans, as more barrels are required to meet financial terms. In addition, the Nigerian National Petroleum Company (NNPC) must set aside a portion of output to cover joint venture costs with partners such as Shell, Seplat, and Oando, further limiting available supply for new loan obligations.
One source familiar with the talks put it bluntly: “It’s hard to find anyone to underwrite it,” pointing to doubts over Nigeria’s ability to guarantee consistent oil deliveries.
In a bid to boost revenue and investor confidence, President Tinubu recently issued an executive order aimed at cutting production costs. Meanwhile, the NNPC is working to scale up output despite persistent structural challenges in the sector.
The 2025 federal budget assumes oil production will reach 2 million barrels per day at an average price of $75 per barrel. However, the World Bank has criticized this forecast as overly optimistic. As of April, Nigeria’s actual output was just above 1.6 million barrels per day, according to figures from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
