FG Says No Final Decision Yet on Proposed $5 Billion Aramco Oil-Backed Loan Deal
By Patience Ikpeme
The Federal Government has stated that no final decision has been reached on the proposed $5 billion crude-for-loan deal currently being discussed with Saudi oil giant, Aramco, amid speculations that the negotiation may have hit a dead end.
This clarification comes in response to recent media reports suggesting the initiative, which could be the country’s largest oil-backed loan arrangement, may have stalled. In a statement issued on Wednesday, the Federal Ministry of Finance said the government remains focused on using innovative and fiscally prudent financing methods to maximize the value of Nigeria’s oil resources, improve external liquidity, and promote macroeconomic stability.
The ministry noted that while discussions are ongoing, the public should disregard unverified reports regarding the status of the deal.
“While market speculation is not uncommon in the context of ongoing economic reforms and transactions, no final decision has been announced by the Government, and commentary suggesting the collapse of any such initiative is unfounded,” the statement read.
The ministry’s position follows a report by Reuters earlier in the week, which indicated that the deal had encountered delays. Citing unnamed sources, the report attributed the setbacks to a slump in global crude oil prices, which reportedly caused concern among potential financiers of the deal, including several Gulf and African banks.
According to the report, the facility, if concluded, would mark Aramco’s first oil-for-loan arrangement of such scale in Nigeria. The deal would also form a significant component of President Bola Tinubu’s broader external borrowing strategy, which includes a recently submitted request to the National Assembly to borrow $21.5 billion to finance the 2024 budget.
People familiar with the ongoing negotiations revealed that the crude-for-cash proposal originated from President Tinubu’s meeting with Saudi Crown Prince Mohammed bin Salman during the Saudi-African Summit held in Riyadh in November 2023. Since then, discussions have reportedly advanced to include financing terms, repayment structure, and crude allocation mechanisms.
As proposed, Nigeria would dedicate at least 100,000 barrels of crude oil per day to secure the $5 billion loan. However, fluctuating international oil prices and domestic production challenges are said to be complicating the structure of the arrangement, particularly regarding pricing benchmarks and repayment schedules.
Market analysts have noted that oil-backed loans offer a means for commodity-dependent countries like Nigeria to access foreign currency financing, especially when market-based options become less attractive or more expensive. However, such arrangements can become risky if oil prices decline or production targets are not met, potentially undermining repayment obligations and fiscal projections.
Despite these challenges, the Federal Ministry of Finance reiterated that the government is committed to leveraging Nigeria’s strategic assets in a manner that balances immediate funding needs with long-term economic sustainability.
The ministry assured that all external financing options under consideration are subject to due diligence, risk assessment, and alignment with the fiscal responsibility framework guiding Nigeria’s debt management strategy.
As of June 2024, Nigeria continues to explore various funding avenues to support its N28.7 trillion 2024 budget, with priority given to infrastructure development, energy transition, and social investment programmes. The outcome of the ongoing talks with Aramco is expected to shape the next phase of the government’s external financing roadmap.
