Nigeria’s proposed $5 billion oil-backed loan deal with Saudi Arabia’s state-owned energy giant, Aramco, has stalled, and the unfolding events highlight the peril of the country’s continued dependence on crude oil to sustain its economy.

While government officials have denied reaching a final decision and dismissed the swirling reports as speculative, financial insiders say the deal’s suspension stems from falling crude prices, deepening market volatility, and doubts about Nigeria’s ability to meet its oil production targets. Lending institutions have reportedly expressed hesitance in backing the arrangement due to these growing concerns.

At the heart of the matter lies a broader issue: Nigeria’s persistent overreliance on oil revenues, which has again left the country financially vulnerable.

Budget Assumptions Collapse Amid Oil Price Drop

Since the start of 2025, Brent crude oil prices have declined by 20%, now hovering around $65 per barrel. Simultaneously, Nigeria’s oil output has dropped to approximately 1.5 million barrels per day—far below the 2 million barrels per day benchmark used to frame the 2025 national budget.

This sharp contrast between projections and reality underlines the inherent dangers of basing fiscal plans on unpredictable commodity markets. Nigeria’s economy remains largely tethered to oil, which accounts for 90% of export earnings and around 60% of government revenue. Each dip in crude prices brings with it a budgetary crisis, showcasing the nation’s failure to build a diversified and resilient economy.

A Pattern of Risky Crude-Backed Loans

The suspended Aramco deal would have tied 100,000 barrels per day to debt servicing. If approved, this would raise Nigeria’s daily crude commitment for loan repayment to nearly 400,000 barrels—around one-quarter of its total current production. This means less oil for domestic needs and public revenue, all while repayment terms worsen as oil prices fall.

From 2019 to 2024, Nigeria—through the Nigerian National Petroleum Company Limited (NNPC)—committed an estimated $21.5 billion worth of oil to forward sales and prepayment loans. Some of these obligations extend as far as 2034, locking up future production and revenues.

In the first two months of 2024 alone, Nigeria reportedly lost about $1.4 billion from 17 million barrels used to service these oil-backed debts. This arrangement often prioritizes lenders over local needs, weakening the treasury’s capacity to fund development.

Oil Volatility and Economic Vulnerability

Recent studies have modeled the structural impact of oil price swings on Nigeria’s economy. A 2023 economic analysis revealed that a 10% drop in oil prices slows the country’s GDP growth by at least 0.3%. Although oil windfalls temporarily boost government revenues, they also create dangerous incentives to borrow more against future production—deepening the fiscal trap.

Nigeria’s budget planning, infrastructure development, and public spending remain hostage to the crude market’s whims, leaving it in a cyclical pattern of boom-and-bust economics.

Decades of Mismanagement and Corruption

Beyond oil price fluctuations, Nigeria’s petroleum sector has long suffered from deep-rooted inefficiencies and corruption. The industry grapples with underinvestment, decaying infrastructure, widespread theft, and mismanagement.

Between 2009 and 2020, Nigeria lost an estimated 619.7 million barrels of crude—worth roughly $46 billion—to theft and vandalism. In 2016 alone, over 15% of the nation’s oil production, valued at N1.16 trillion, was lost.

A leaked 2012 government report revealed a $29 billion loss to gas pricing scams, while an audit in 2022 found that NNPC failed to remit $4.6 billion from crude sales over four years. Fuel subsidy fraud cost the nation $450 million between 2006 and 2012, according to a former EFCC chairman.

Despite being one of Africa’s largest oil producers, Nigeria has little development to show for its oil wealth. Decades of mismanagement have resulted in inadequate healthcare, crumbling infrastructure, poor education, and minimal fiscal savings.

Global Comparisons Show Nigeria’s Missed Opportunity

Norway offers a striking contrast. Despite discovering oil 11 years after Nigeria, it has built a sovereign wealth fund worth $1.8 trillion. This fund operates under strict rules, allowing only a 3% annual withdrawal to preserve its value for future generations.

In comparison, Nigeria’s sovereign wealth fund stands at just $2.95 billion. Its Excess Crude Account—once holding over $20 billion in 2008—has dwindled to under $500,000. These figures reveal the scope of squandered oil wealth.

The Case for Urgent Diversification

Nigeria’s economic salvation lies not in more oil-backed loans but in decisive, long-overdue diversification. The country must unlock the transformative potential of non-oil sectors—particularly agriculture, mining, manufacturing, and technology.

Agriculture as a Growth Engine

Nigeria boasts 84 million hectares of arable land, of which nearly half remains uncultivated. With a 70 million-strong agrarian workforce, the country could reclaim its role as Africa’s agricultural powerhouse.

Reviving cash crops like cocoa, cotton, oil palm, and cashew could boost foreign earnings. Global demand for cassava derivatives alone could bring in $5 billion annually by 2030 with the right infrastructure.

Livestock is another untapped goldmine. Nigeria has 21 million cattle, yet remains a net importer of beef and dairy. In contrast, the Netherlands, with just 3.7 million cows, earned $10 billion from milk exports in 2023. Brazil’s beef industry, worth $262 billion, generated $12.8 billion in exports last year.

Brazil’s recent $2.5 billion investment in Nigeria’s meat industry via food giant JBS offers a potential turning point. Meanwhile, the Tinubu administration’s delivery of 1,000 of 2,000 promised tractors could improve farm mechanization if rapidly deployed.

Innovative digital platforms like Farmcrowdy and Thrive Agric are already linking farmers to capital and markets. Scaling such initiatives, while improving fertiliser access and rural security, can rejuvenate the sector.

Mining: Nigeria’s Untapped Trillions

With mineral reserves valued at over $700 billion—including lithium, gold, and rare earths—the solid minerals sector contributes a meagre 0.5% to GDP. Reforms targeting this sector could unlock exponential growth.

Though the government aims to attract $500 million in mining investments by 2026, just 3% of minerals are currently processed locally. However, Chinese-backed lithium plants in Kebbi and Nasarawa are beginning to shift this narrative.

Blue Economy and Digital Frontiers

Nigeria’s marine sector could be worth $150 billion by 2030. By scaling aquaculture, the country could meet its fish consumption needs domestically, saving $1.2 billion in annual imports. Offshore wind and tidal energy can also contribute 1,000 MW to the national grid.

Tourism remains a sleeping giant. Nigeria’s 850-kilometre coastline could become a hub for cruise tourism, coastal resorts, and ecotourism. The tourism sector is projected to earn $3.77 billion in 2025 and $5.6 billion by 2029—with the right policy execution.

Meanwhile, the digital economy is experiencing a surge. Nigeria’s tech sector is growing at 12.5% annually, projected to become a $75 billion industry by year-end. With five of Africa’s nine unicorns originating in Nigeria, the potential is undeniable.

Reforming Manufacturing and Human Capital

Nigeria’s manufacturing revival hinges on structural reforms: reducing multiple taxation, stabilising exchange rates, improving credit access, cutting logistics costs, and overhauling energy infrastructure.

In parallel, the government must prioritize investments in STEM education and vocational training to build a skilled workforce for diversified sectors.

China’s ascent as a global manufacturing and tech power was built on a foundation of quality education and disciplined economic planning. Nigeria must follow suit.

Fixing Governance to Unlock Growth

Diversification will remain elusive unless Nigeria confronts entrenched corruption and enforces fiscal transparency. This includes:

• Public audits of NNPC and other oil revenues.

• Timely investment in infrastructure, power, transport, and education.

• Implementation of tax reforms to boost compliance and raise the tax-to-GDP ratio from 13.5% to 18%.

The global shift toward clean energy and renewable resources makes crude oil a declining asset. Nigeria must act now to escape its oil addiction and chart a path toward inclusive, sustainable prosperity.

The Aramco loan crisis is not just a fiscal challenge—it is a national wake-up call.