Nigeria’s $5 billion oil-backed loan from Aramco delayed by oil price drop – Report

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, according to Reuters report.

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, the sources said.

According to the publication, Nigeria’s President Bola Tinubu, first broached 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 $21.5 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.

Gulf banks and at least one African lender are involved. Reuters could not establish the banks’ identities.

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

Saudi Aramco declined to comment. Nigeria’s state-owned oil company NNPC did not comment, and neither did the finance or petroleum ministries.

Nigeria has years of experience taking out – and repaying – oil-backed loans – which the government uses for budget support, shoring up foreign reserves or to revamp state-owned refineries.

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