Earlier this month, Nigeria's Under-23 coach Samson Siasia travelled to London to speak with his players and secure their club release for the tournament.
Arsene Wenger said in April that he would allow Iwobi to join up with his country, even though it would mean that the 20-year-old would miss the start of the new season.
But in his latest talks with Arsenal, Siasia claims that the Gunners are ready to make a U-turn on their decision.
“I went to Arsenal and I saw Richard Law and he said that we still need to look at [the possibilities of the player going to the Olympics or not],” Siasia told a popular news agency.
“He said that he wants Iwobi to stay with Arsenal because they are having a new team and Alex is getting to play in the team for now.
“He said if he leaves to play for Nigeria at the Olympics how is he going to be a part of the team and maybe someone is going to take his position.
“I said, well we have to meet half way because we are trying to give Alex a platform to show himself in the Olympics and he has to look at it that way too.
“He said we should continue to talk and we would see what we would do."
Despite Arsenal's protests during negotiations, it was gathered that Iwobi is still confident that he will be allowed to represent Nigeria, who face Sweden, Colombia and Japan in the group stage in August.
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