The Nigerian government is pursuing a $5 billion trade loan from Saudi Arabia, aiming to invigorate its ambitious economic reform agenda which focuses on sectors critical to national growth, such as agriculture, oil and gas, and infrastructure.

According to Bloomberg, the presidency confirmed the request on Tuesday after President Bola Tinubu’s meeting with Saudi Arabia’s Crown Prince Mohammed bin Salman in Riyadh. As part of the agreement, Saudi Arabia pledged support for Nigeria’s reform efforts, reinforcing bilateral cooperation between the two nations.

According to a presidential statement, discussions centered around establishing the Saudi-Nigeria Business Council and identifying joint investment opportunities across agriculture, oil and gas, infrastructure, and technology. The formation of this council aims to create an organized, bilateral platform to drive targeted investments between Saudi Arabia and Nigeria, two nations with complementary economic strengths.

This proposal marks a renewed interest in partnership with Saudi Arabia following the federal government’s previous efforts to establish a framework for cooperation through the Saudi-Nigeria Business Council. The council, initially proposed a year ago, was later halted under the administration of former President Muhammadu Buhari.

But in recent months, President Tinubu’s administration has been actively working to reactivate and expand on this collaborative effort, positioning Nigeria as a key investment hub in the region. According to Abubakar Atiku Bagudu, Minister of Budget and Economic Planning, discussions include funding in sectors beyond traditional energy—such as agriculture, telecommunications, and mining.

Tinubu’s latest visit to Riyadh follows several diplomatic exchanges aimed at strengthening Nigeria’s ties with Saudi Arabia, which he views as a vital ally for both economic and regional stability. With Saudi Arabia’s Crown Prince Mohammed bin Salman offering support for Tinubu’s economic reforms, this partnership has the potential to catalyze Nigeria’s development goals.

The presidency added that the Saudi government’s willingness to invest in sectors like agriculture and infrastructure could yield substantial economic returns.

The $5 Billion Loan Raises A Question

One aspect of Nigeria’s appeal to Saudi Arabia for financial assistance that has raised questions, however, is the state of Nigeria’s foreign reserves. In recent statements, the Central Bank of Nigeria (CBN) reported the country’s foreign reserves at approximately $40 billion, a figure that, under normal circumstances, would imply some level of economic buffer.

Financial analyst Kelvin Emmanuel expressed surprise over Nigeria’s appeal for a loan given its ostensibly stable reserves.

He remarked, “You can imagine having $40bn in your external reserves with asset managers and still seeking a concessionary loan from a bilateral partner to do balance of payments. Doesn’t it betray logic?”

However, Emmanuel acknowledged that the trade loan could have favorable terms for Nigeria. “If they agree,” he noted, “it will be welcome as there’s a moratorium on interest payments, an interest rate that will not exceed the secured overnight financing rate (SOFR) of 6%, and room for repayment on principal.” Emmanuel further questioned the government’s approach, asking, “What will you record it as?”

This recent push for partnership with Saudi Arabia reflects a broader realignment of Nigeria’s foreign policy to secure strategic alliances in economic development and resource management. Recent discussions have focused on several key areas, from agriculture to emerging technologies. Last November, a renewed commitment to collaboration on trade, technology, and energy underscored the countries’ shared interests in establishing robust and sustainable economic relations.

Nigeria’s recent engagements in the Gulf, including Tinubu’s visit to Riyadh, also highlight Nigeria’s diplomatic support on humanitarian and regional issues.

Should Saudi Arabia grant the $5 billion loan, it would provide Nigeria with critical financial leverage as it implements reforms aimed at economic stability and growth.

The collaboration also stands to benefit Saudi Arabia, which, through investments in Nigeria’s market, could strengthen its own economic influence across West Africa. The Saudi-Nigeria Business Council is anticipated to serve as a gateway for ongoing business exchanges, enhancing bilateral trade and investment opportunities that would yield long-term benefits for both nations.