Abstract
Nigeria uses the concessionary petroleum fiscal system for onshore investment in the country where the ownership of the hydrocarbon resources belongs to the contractor's. The government then gets her revenue through payment of royalties and taxes. A fixed royalty rate of 20% is specified for onshore petroleum investment in the country. This kind of royalty payment system is regressive in nature and affects the sustainability of E&P firms during period of low oil price. This research considered the incorporation of a delayed royalty framework into the concessionary petroleum fiscal system in Nigeria. Two economic models were built to evaluate upstream petroleum investment in Nigeria onshore environment using the spreadsheet modeling technique. The delayed royalty framework was incorporated into one of the model. The delay in royalty payment was made as a function of the time it takes the contractor to recoup his capital before payment of royalty and taxes. Oil price was varied in the model between $30-$90/bbl to see the impact of the delay in royalty payment on the sustainability of the investment under the delayed royalty framework. It was observed that the delayed royalty framework made the contractor to recoup his capital early during the life of the investment. It also increased the contractor's revenue which will help to increase the sustainability of the investment during period of low oil price.
