The global coronavirus pandemic drastically slowed down and in most cases halted completely business activities. But as signs of re-opening slowing gains traction, Nigeria’s economic mainstay, oil, is in the news. Today marks the deadline for oil companies and investors to submit bids to the Nigerian Department of Petroleum Resources for the first marginal oil field award round in two decades. The submission deadline, originally slated for June 14, was extended last week.
Nigerian oil companies and investors working as oil exploration and production businesses would be allowed to enter in the auction for the 57 fields, while companies that are indebted to the government or hold oil assets without operating in a “business-like manner” cannot participate. The bids are aimed at supplying the government with revenue after recent budget shortfalls.
Although the government has demonstrated a need for revenue accumulation, concerns surround the bidding process. Fluctuating oil prices pose a challenge to investors who base their valuations on pricing models that are quickly changing. Local companies have also suffered from the pandemic and may not have adequate funding to submit bids.
These issues have raised concern that the oil fields could end up in the ‘wrong’ hands, as many experienced local companies will likely be crowded out due to lack of capital. As a result, the Nigerian government may extend the deadline further and wait for the oil economy to settle, especially since bidding rounds for major oilfields are delayed until prices stabilise.
(The West African Pilot News and Foreign Briefs)
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