Concerns Mount as Nigeria Runs to Saudi Aramco for $5bn Loan
Nigeria is seeking to raise a $5 billion oil-backed loan from Saudi Aramco as part of an effort to boost capital spending and drive economic growth in the absence of organic growth.
The move to increase external borrowing, which amounts to N8 trillion in local currency at the prevailing exchange rate, has raised concerns about public debt sustainability. Zedcrest Research predicted in its macroeconomic report for the second half of 2025 that the government will accelerate borrowings to shore up the budget deficit.
Local borrowing has slowed, with analysts saying for budget 2025 spending plan to meet its target, the authority will have to raise N7 trillion, given the fact that government revenue has been underperforming from the beginning of the year to date, thanks to the below-budget price of oil.
But Nigeria and Saudi Arabian oil company Aramco are reportedly facing difficulties finalising a record US$5 billion oil-backed loan, which was first announced last November following a meeting between President Bola Tinubu and Saudi Crown Prince Mohammed bin Salman at the Saudi-African Summit.
The oil-backed loan, if granted, amounts to 3% of Nigeria’s gross domestic product (GDP), as per commentary note released by CSL Stockbrokers Limited
According to a Reuters report citing sources familiar with the development, the delay in negotiations has been attributed to the recent declines in global crude prices, prompting caution among the banks expected to finance the deal.
“We believe that the reluctance of lenders to commit to the proposed US$5 billion oil-backed loan reflects a combination of structural and market-related concerns”, CSL Stockbrokers Limited said in a commentary note.
The firm said chief among these are doubts about Nigeria’s ability to consistently meet its oil supply obligations, given persistent production shortfalls and existing oil-backed deals.
With crude oil prices increasingly expected to average around US$65 per barrel this year, a downsized version of the proposed loan facility appears more likely. While such a deal could provide short-term fiscal relief and a boost to foreign exchange reserves, it would also deepen Nigeria’s dependence on volatile oil markets and further encumber future oil revenues.
Against this backdrop, the government must proceed with extreme caution. CSL Stockbrokers said the authorities should urgently focus on expanding its oil production capacity—not only through investment but also addressing persistent challenges such as pipeline vandalism, oil theft, and operational inefficiencies.
Also, analysts advised Nigeria to adopt a more balanced debt strategy that avoids excessive reliance on oil-backed instruments. Diversifying the economy and broadening non-oil revenue streams must become a national priority.
Analysts said transparency in debt negotiations is essential. Citizens and stakeholders must have clear insight into the terms of oil-for-loan deals, as this is critical for understanding its implications on the fiscal space.
In short, while the proposed loan may help address immediate budgetary pressures, it risks exacerbating Nigeria’s long-term fiscal vulnerabilities, CSL analysts highlighted.
“Without a coherent strategy to manage debt sustainably and boost domestic revenue generation, Nigeria could find itself trapped in a cycle of borrowing against future oil production”, the firm stated. #Concerns Mount as Nigeria Runs to Saudi Aramco for $5bn Loan Zenith Bank Rises as Investment Firms Upgrade Target Price
