Good Deal Gone Bad in Nigeria

An agreement between the Nigerian government and British-based Process and Industrial Developments Limited (P&ID) to build a natural gas processing plant off the coast of Nigeria seemed like the perfect deal.

The plant would be profitable for both P&ID and the Nigerian government and more importantly would significantly increase the electrical generating capacity of Nigeria, which is desperately needed by its citizens.

In a bizarre twist, however, the deal fell through while profiting only a few at the expense of P&ID, the Nigerian government and most importantly the Nigerian people.

It is not only Nigeria. Western energy firms repeatedly have suffered the consequences of great deals gone bad in nations with weak enforcement of contractual obligations and the rule of law. Once a significant capital investment has been made, powerful incentives are created to capture the economic value of those investments (“quasi-rents” in econ-speak) by reneging and other strategic behavior.

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