FG’s plan to secure $5bn oil-backed loan stalls as crude Prices fall below $70



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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