By:Egyptoilgas

Nigeria and Saudi Arabia’s state oil giant, Aramco, are facing challenges in finalising a landmark $5 billion oil-backed loan, according to Reuters. The falling crude prices have raised concerns among banks expected to support the arrangement. Oil-backed loans allow a company or a country to acquire a loan in exchange for future oil production or returns.

The deal would represent Nigeria’s largest oil-backed loan to date and mark Aramco’s most significant financial involvement in the country.Aramaco is expected to be the lead financier of the loan, together with Gulf banks. However, sources indicated that the recent drop in oil prices could lead to a reduction in the overall size of the loan.

One of the sources added that the loan was first proposed in November by Nigeria’s President Bola Tinubu during a meeting with Saudi Crown Prince Mohammed bin Salman at the Saudi-African Summit in Riyadh. Until now, the specifics and progress of the loan negotiations have not been publicly disclosed.

The sluggish pace of negotiations highlights the pressure created by the recent decline in oil prices after OPEC+ decision to increase oil production. According to Reuters, Brent crude prices have dropped by approximately 20%, falling from over $82 per barrel in January to around $65, adding further uncertainty to oil-backed financing discussions.