Negotiations over a record $5 billion oil-backed loan between Nigeria and Saudi Arabian oil giant, Aramco, have hit a roadblock amid concerns from potential lenders triggered by falling global oil prices.
According to a Reuters report citing four sources, banks that were expected to back the deal are now hesitant due to the instability in the oil market, raising doubts about Nigeria’s ability to meet its crude delivery obligations under the proposed agreement.
The deal, which would represent Nigeria’s largest-ever oil-backed loan and mark Saudi Arabia’s most significant financial engagement in the country to date, was initially proposed by President Bola Tinubu during a meeting with Saudi Crown Prince Mohammed bin Salman at the Saudi-African Summit in Riyadh last November.
Sources say the recent sharp drop in Brent crude—from above $82 per barrel in January to around $65—has complicated efforts to finalise the loan, as more barrels would now be required to secure the same amount of financing. Years of underinvestment and production shortfalls have only heightened lenders’ fears.
“This deal is proving difficult to underwrite due to concerns about cargo availability,” one source told Reuters.
The Nigerian National Petroleum Company Limited (NNPC) is already using up to 300,000 barrels per day (bpd) to service previous oil-backed loans, with at least one of those loans expected to be paid off this month. Adding another 100,000 bpd to secure the proposed $5 billion facility with Aramco could strain Nigeria’s ability to meet both existing obligations and domestic needs.
NNPC has entered into prepayment oil deals worth approximately $21.6 billion since 2019, including the $11 billion Project Gazelle series. These deals, often structured as forward sales or pre-export financing, allow Nigeria to receive upfront cash in exchange for future oil deliveries. While they provide short-term liquidity, critics have warned of their long-term consequences on transparency, economic sovereignty, and energy security.
With oil prices down, repaying such facilities becomes more difficult and lengthier, as more crude is required per dollar borrowed. This dynamic is already affecting Nigeria’s ability to supply domestic refiners, notably the Dangote Refinery, which has been forced to import crude despite Nigeria’s status as Africa’s top oil producer.
Industry insiders say that NNPC’s obligation to fulfill forward sale agreements has severely impacted its ability to meet the Domestic Crude Supply Obligation (DCSO), putting pressure on local refining initiatives and undercutting the goal of energy self-sufficiency.
Moreover, lower oil prices mean NNPC must allocate more barrels to joint venture partners like Shell, Oando, and Seplat to meet its share of operational costs, further reducing available crude for new loan deals or domestic supply.
“You either find more oil or renegotiate existing terms,” one source noted.
Nigerian trading firm Oando is reportedly expected to manage the offtake of the physical cargoes under the Aramco deal, but the company declined to comment when contacted by Reuters. Aramco, NNPC, and Nigeria’s finance and petroleum ministries also declined to respond.
President Tinubu’s administration had earlier sought approval for $21.5 billion in external loans to support the 2025 budget, of which the Aramco facility was expected to form a key part. The country’s current budget is predicated on oil production of 2 million bpd at a price of $75 per barrel. However, actual output has hovered below 1.5 million bpd, according to OPEC’s May market report.
To increase production and ease fiscal constraints, Tinubu has issued an executive order to cut oil production costs, which could potentially increase government revenue per barrel.
Nonetheless, with some oil-backed contracts stretching as far as 2034, Nigeria has effectively committed a substantial portion of its future crude output to repay past borrowings—raising fresh concerns about its ability to navigate both immediate and long-term economic challenges.