As the Middle East convulses under a new wave of geopolitical violence, with war escalating between Iran and Israel, Nigeria stands at a critical crossroads. While the nation negotiates a record-breaking $5 billion oil-backed loan with Saudi Aramco, what should be a moment of strategic foresight instead reveals a worrying shortfall in geopolitical imagination.
The forward sale of crude oil to secure external loans, particularly amid a volatile global oil market, is a dangerous gamble. At a time when global energy dynamics are shifting under the weight of war, and the Strait of Hormuz, through which more than 20% of global oil exports pass, is under threat from Iranian retaliation, Nigeria should be positioning itself for a potential windfall, not mortgaging its future barrels for immediate cash. But instead, we find ourselves entering opaque deals that jeopardize the country’s long-term fiscal stability.
The latest series of attacks on oil and gas infrastructure in Iran’s South Pars gas field, coupled with Tehran’s explicit threat to shut down the Strait of Hormuz, should set off alarms not only in Washington, Paris and London but in Abuja as well. The threat is not just regional. It is global, and it is also an opportunity. History is unambiguous. When war shakes the Middle East, oil prices surge. Nigeria’s civil war that ended in 1970 came with the oil boom that filled our coffers, albeit squandered. In 1973, during the Arab oil embargo, oil prices quadrupled, with Nigeria raking in record earnings. This was also mismanaged. The Gulf War of 1991–1992 sent oil prices soaring again, with Nigeria among the chief beneficiaries. This windfall went missing.
Today, all signs point to a similar market upheaval. Yet rather than preparing to leverage a crisis-driven oil price surge, Nigeria is discounting its crude into the future through forward sales, shackled to obligations that assume oil prices will remain flat or drop. In effect, Nigeria is selling its oil when it is cheap.
One is compelled to ask: what are the Analysis Desks at both the Ministry of Foreign Affairs and the National Intelligence Agency (NIA) doing? What are the geopolitical forecasters there studying? Are they not reading the increasingly inevitable reality that the Iran-Israel conflict is escalating into a full-scale regional war? Even without access to classified information, any diligent open-source analyst should have been able to trace the arc from tit-for-tat drone and missile strikes that started last October. The signs are glaring. The intent is clear. The Strait of Hormuz is one airstrike away from being closed, or at least militarily disrupted, which will cause global oil panic and a corresponding surge in demand from non-Gulf exporters. Why then is Nigeria acting like a cash-strapped trader offloading barrels at peacetime prices?
Oil-backed loans are not new in Nigeria. But the current one under discussion with Saudi Aramco is unprecedented in size and opaque in execution. According to reports, Nigeria is already using 300,000 barrels per day to service existing oil-backed loans. This new $5 billion facility may demand another 100,000 barrels daily, potentially locking up nearly 30% of Nigeria’s daily production for debt service. All this at a time when production remains well below the 2 million bpd target, hovering instead around 1.5 million bpd, according to recent OPEC figures.
If oil prices spike, as they surely will in a prolonged Middle East conflict, the economics of these forward-sold barrels become deeply problematic. Nigeria will owe high-priced oil in exchange for low-priced loans. This is not fiscal planning. It is mortgaging the national future. Worse still, such deals are wrapped in secrecy. Nigerians are not informed of the repayment schedules, the interest structures, or the physical oil commitments involved. Given Nigeria’s history, where the oil boom of the 1970s was mismanaged by General Gowon’s government, and the revenues of the Gulf War era outright stolen under General Babangida, there is no reason to trust that this deal will be any different with Alhaji Tinubu.
Conflicts in the Middle East benefit oil producers outside the region. This includes Nigeria. When tankers can no longer move freely through the Hormuz, buyers will turn elsewhere. Africa, the Americas, and Asia will see demand surge, and prices will follow. At the risk of being labeled a war profiteering apologist, we must state what strategic thinkers around the world already know: in the midst of chaos, there is opportunity. This is not a call to encourage war. Nigeria has already rightly called for de-escalation. But it is a call for preparedness, for agility, and above all, for vision.
Rather than locking ourselves into Aramco’s loan terms, Nigeria should be doing the acting strategically. First, the government must position a meaningful portion of daily crude production for uncommitted, market-based sales. If oil prices rise to $120 or $150 per barrel in a prolonged Middle East war, Nigeria must be free to sell at full market rates. Second, the government must open the Aramco deal to public scrutiny. Nigerians have a right to know how many barrels are being pledged, over what period, and at what implied price. Third, the government should activate a crisis-response sovereign energy strategy that enhances windfall management by leveraging and strengthening the existing Sovereign Wealth Fund. Finally, the government should strengthen the analytic capabilities of the Foreign Ministry, NIA, and Economic Intelligence units, so they can anticipate crises, not merely react to them.
Nigeria is not marginal player in the global energy conversation. We are Africa’s largest crude oil producer, a key member of OPEC, and a nation whose economic fortunes rise and fall with the price of Brent crude. To enter a $5 billion oil-backed loan with Saudi Aramco while the Middle East hurtles toward a long war is not just poor timing, it is a failure of strategic foresight. And unless the government opens its eyes to the moment, unless it begins to think not just as a borrower but as a sovereign energy power, we will again find ourselves with empty pockets and full regret. In geopolitics, as in chess, the missed opportunity is often the most painful loss.
