Saudi oil giant Aramco has hit pause on a proposed $5 billion crude-backed loan to Nigeria, as ongoing volatility in global oil markets raises red flags for potential financiers.
According to Reuters, the deal — originally initiated by President Bola Tinubu in November during bilateral talks with Saudi Crown Prince Mohammed bin Salman — has been stalled by falling oil prices and market uncertainty, leading banks involved to reassess their commitments.
🔍 Key Highlights:
- Oil Price Slump: Brent crude has dropped nearly 20%, from over $82 in January to around $65, shrinking the deal’s potential and making oil-backed repayment less attractive.
- Banker Hesitation: Financial institutions — including Gulf banks and an unnamed African lender — are reportedly concerned about Nigeria’s oil production capacity and ability to consistently deliver oil cargoes to service the loan.
- Repayment Pressure: Nigeria already uses over 300,000 barrels per day (bpd) to repay other oil-backed loans, and adding 100,000 bpd for this new deal could strain resources.
- Underproduction Woes: Nigeria’s April production was 1.5 million bpd, well below its 2 million bpd budget projection, limiting its leverage.
- Oando Role: Nigerian oil company Oando is expected to manage the offtake of crude cargoes under the deal, though it has not officially commented.
- Budget Support: The $5bn loan is part of a broader $21.5bn borrowing plan by the Tinubu administration to bridge budget gaps and stabilize foreign reserves.
Despite past successful oil-backed loans, analysts warn that Nigeria’s under-investment in upstream operations, rising operational costs, and fluctuating prices could complicate future deals. While NNPC has not issued a clear statement, officials noted the need to consult the finance and petroleum ministries, both of which are yet to respond.
Nigeria has relied on crude-for-cash arrangements in the past, but with global oil markets reacting to OPEC+ output decisions, geopolitical tensions, and Trump-era trade rhetoric, these deals are becoming harder to secure — or sustain.
