Nigeria’s $5 billion Saudi Aramco Loan Delayed by Oil Slump

Nigeria and Saudi Arabian oil company Aramco are struggling to reach an agreement on a record $5 billion oil-backed loan after a recent decline in crude prices sparked concern among banks that were expected to back the deal, Reuters reported.

The facility would be Nigeria’s largest oil-backed loan to date and Saudi Arabia’s first participation of this scale in the country, although the decline in oil price could shrink the size of the deal.

Nigeria’s President Bola Tinubu, first requested the loan in November when he met with Saudi Crown Prince Mohammed bin Salman in Riyadh at the Saudi-African Summit.

The slow progress in discussions reflects the strain of the recent oil price drop, caused largely by a shift in OPEC+ policy to regain market share rather than curtail supply.

Brent has fallen about 20% to around $65 per barrel from above $82 in January.

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.

Tinubu sought approval for $24 billion in foreign borrowing last month to bolster the budget, and the $5 billion oil-backed facility under discussion with Aramco would be part of that, sources said.

The banks involved in the talks that are expected to co-fund part of the loan with creditor Aramco have expressed concerns about oil delivery, which has slowed discussions, Reuters sources said.

Gulf banks and at least one African lender are involved, they added.

“It’s hard to find anyone to underwrite it,” one source said, citing concerns over the availability of the cargoes.

At $5 billion, the Aramco loan would be backed by at least 100,000 barrels per day of oil, the sources said.

However, it would almost double the roughly $7 billion of oil-backed loans taken in the last five years.

Nigeria is using at least 300,000 bpd to repay NNPC’s other oil-backed loans, though one facility is expected to be paid off this month. Africa’s largest crude producer pumped just under 1.5 million bpd in April, according to the May OPEC market report.

The amount of oil going towards repaying existing oil-backed loans is fixed, but when the crude price falls, it takes longer to repay them.

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