Crude Price Slump Delays Saudi Aramco’s $5 Billion Loan to Nigeria
Negotiations over a record $5 billion oil-backed loan from Saudi Aramco to Nigeria have stalled amid concerns triggered by the recent sharp drop in crude oil prices, Reuters reported Tuesday.
The loan, which would be Nigeria’s largest oil-backed facility to date and Saudi Arabia’s first major oil-backed deal with the country, faces uncertainty as lower oil prices raise doubts among participating banks expected to co-fund the deal.
Brent crude has fallen about 20% from over $82 per barrel in January to around $65, a decline largely driven by OPEC+’s shift in policy to regain market share rather than limit supply. The slump means Nigeria might have to allocate more barrels as collateral to meet the loan’s terms.
“A lower oil price means Nigeria could need more barrels to back the loan, but years of under-investment are complicating its ability to meet production goals,” sources told Reuters.
The $5 billion loan would require at least 100,000 barrels per day (bpd) of oil as collateral, nearly doubling the country’s current $7 billion oil-backed loans over the last five years. However, Nigeria is already using around 300,000 bpd to repay existing oil-backed debts, complicating the situation further.
Banks involved in the discussions, including Gulf lenders and at least one African bank, have expressed hesitancy. “It’s hard to find anyone to underwrite it,” a source said, highlighting concerns over cargo availability.
The loan idea was reportedly introduced by President Bola Tinubu during his November meeting with Saudi Crown Prince Mohammed bin Salman at the Saudi-African Summit.
With the loan’s slow progress, Nigeria’s efforts to secure foreign borrowing, part of a $21.5 billion budget support plan, face additional challenges as falling oil prices impact repayment timelines and joint-venture operations.
