The negotiations between Nigeria and the Saudi Petroleum Giant Aramco on a loan full of $ 5 billion backed by oil have reached an obstacle after a strong fall in crude oil prices, which caused caution among the banks that the agreement is expected to co -finance.
According to a Reuters report, the proposed installation, which is due to be the larger loan backed by Nigeria and the most significant financial commitment of Aramco with the country, has slowed in the midst of concerns that the fall in oil prices could reduce the value of the agreement. Market sources say that the recession is uncomfortable to lenders about Nigeria's ability to fulfill their delivery obligations.
President Bola Tinubu began the discussions for the first time with the Saudi heir prince Mohammed Bin Salman during the Saudi-African summit in Riad last November. However, so far, little has been revealed about the progress or scale of conversations.
The slow rhythm of negotiations reflects the pressure that Nigeria faces the weakest oil markets. Brent Crude has collapsed almost 20 percent, of more than $ 82 per barrel in January to around $ 65, after a change in the OPEC+ policy that prioritized the market share on price control. Declive prices complicate loans structuring, since Nigeria may need to commit more barrels to ensure the same financing: the elimination of their current production limitations.
The Aramco Agreement of $ 5 billion is part of a broader external loan plan of $ 21.5 billion, President Tinubu presented last month to plug budget deficits. But the sources say that banks involved in the loan, Gulf institutions and at least one African lender have expressed concerns about Nigeria's ability to guarantee stable oil shipments.
“There are doubts to subscribe the installation due to uncertainties around the availability of load,” said a source.
While Aramco, the NNPC state NNPC of Nigeria, and the Ministries of Finance and Petroleum have declined to comment, market experts indicate broader issues of structural inefficiencies and inefficiencies in the country's oil sector.
Nigeria has an oil -supported loans, typically used for budget support, stabilization of foreign reserves or refinery updates. However, the proposed loan of $ 5 billion, backed by at least 100,000 barrels of crude oil per day, would represent a substantial increase over the approximately $ 7 billion taken through similar agreements in the last five years.
Currently, NNPC is using an estimated 300,000 barrels per day to address existing oil backed loans, although one of these facilities is completed this month. As oil prices decrease, the fixed reimbursement structure means that it has been more pending debts to liquidate more, further striving raw volumes available.
By aggravating the challenge, the lowest prices require NNPC to assign more barrels to joint business partners such as Shell, Seplat and Oando to meet the obligations of operating costs.
“Either the terms of the existing agreements find more oil or renegocia,” said another source of the industry.
The commercial firm is expected to manage the physical compensation of raw charges that support the loan, although the company has not issued a public statement about its participation.
Increase production, reduce costs
In an attempt to increase production, President Tinubu recently signed an executive order aimed at reducing production costs, thus increasing net income per barrel. Even so, the challenges persist. Although the Government's 2025 budget assumes a point of reference per barrel of $ 75 per barrel and the daily production of 2 million barrels, the real production in April fell short at just under 1.5 million barrels, according to the May Market Report of the OPEC.
With the decrease in prices, restricted production and increased fiscal pressure, Nigeria's ambition to ensure an oil installation of $ 5 billion faces against winds against. Unless oil prices recover or production improves significantly, both the scale and the viability of the agreement with Aramco remain uncertain.