Wednesday, June 11, 2025 - The Federal Government’s plan to secure a $5 billion oil-backed loan from Saudi oil giant Aramco is facing serious setbacks due to falling global crude oil prices.
According to a Reuters report citing four sources, the
recent drop in oil prices has raised concerns among banks expected to
co-finance the deal. The plan, if finalized, would mark Nigeria’s largest
oil-backed loan to date and the first of such scale involving Saudi Arabia.
However, with Brent crude dipping nearly 20% from over $82 in January to around
$65 per barrel, the declining prices are dampening the deal’s prospects.
According to the report, President Bola Tinubu reportedly
introduced the loan proposal during a meeting with Saudi Crown Prince Mohammed
bin Salman at the Saudi-African Summit in Riyadh last November. Though the
discussions are ongoing, progress has slowed significantly due to market
volatility and concerns about Nigeria’s oil output capacity
The deal would require Nigeria to commit at least 100,000
barrels of oil per day to secure the loan. However, given years of
underinvestment in the oil sector, meeting this production level remains a
challenge. Nigeria currently uses around 300,000 barrels per day to service
existing oil-backed loans, one of which is expected to be fully repaid this
month.
Industry told the publication that a drop in oil prices
lengthens the time required to repay such loans, as more crude is needed to
meet financial obligations. Furthermore, NNPC must allocate additional oil to
cover joint venture operating costs with partners such as Shell, Oando, and
Seplat, reducing available output for new loan commitments.
One source described the situation bluntly: “It’s hard to
find anyone to underwrite it,” citing growing doubts over Nigeria’s ability to
deliver on the oil volumes required.
In response, President Tinubu has issued an executive order
aimed at reducing production costs, in a bid to increase net revenues from each
barrel of oil. Simultaneously, the NNPC is working to ramp up production amid
lingering structural challenges in the sector.
The government’s 2025 budget projects oil production at 2
million barrels per day at an assumed price of $75 per barrel. However, the
World Bank has called this target overly ambitious. In April, Nigeria’s actual
production stood just above 1.6 million bpd, according to data from the
Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
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