Negotiations over a landmark $5 billion oil-backed loan between Nigeria and Saudi Arabia’s Aramco have slowed, as doubts grow over Nigeria’s ability to guarantee the crude volumes needed to carry out the deal.
The agreement, first initiated during President Bola Tinubu’s meeting with Crown Prince Mohammed bin Salman at the Saudi-African Summit in Riyadh last November, was intended to boost Nigeria’s strained finances and deepen Saudi involvement in West African energy. But the country’s persistent underperformance in oil production has become a key stumbling block.
To back the proposed loan, Nigeria would need to commit at least 100,000 barrels per day (bpd) of crude over an extended period. However, production levels continue to fall below expectations. In April, Nigeria pumped just under 1.5 million bpd, well below its 2 million bpd target for 2025. A combination of oil theft, pipeline sabotage, and long-term underinvestment has made output unreliable.
Three sources involved in the talks said Aramco and prospective partner banks have raised concerns over Nigeria’s capacity to deliver on the oil repayment commitments. “There’s a credibility gap,” according to a report by Reuters. “You can’t structure a deal of this size without firm guarantees that the barrels will be there month after month.”
Nigeria is already using over 300,000 bpd to repay existing oil-backed loans, most of them secured over the last five years. With oil prices down nearly 20% since January, it now takes more barrels to cover the same debt value, compounding the pressure. President Tinubu, who is seeking over $21 billion in foreign loans to support this year’s budget, had pinned significant hopes on the Aramco deal. Sources say Nigerian trading firm Oando is expected to handle the physical offtake of oil cargoes, while the Nigerian National Petroleum Company (NNPC) would be responsible for allocations. Neither NNPC, Oando, nor Aramco responded to requests for comment.
Talks have involved several Gulf banks and at least one African lender, though sources indicated financial institutions are increasingly hesitant. “The uncertainty around Nigeria’s export reliability is the biggest risk factor,” said a person briefed on the discussions.
To ease the strain, the Tinubu administration has issued an executive order to cut upstream production costs, aiming to boost output and free up more oil for debt servicing. However, experts say these measures will not resolve the immediate constraints on supply.
If production issues persist, the size of the Aramco facility may have to be revised downward or delayed indefinitely. For now, Nigeria’s limited export capacity remains the primary obstacle to unlocking what would be its largest oil-backed loan to date.
THE GUARDIAN
