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Traffic passes through intersecting roads in Nigeria's capital Abuja.

Afolabi Sotunde/Reuters

Nigeria's oil industry has a reputation for theft and corruption that has defeated countless entrepreneurs over the decades. But when Canadian investor Stephen Shefsky decided to forge ahead with a $453-million (U.S.) oil deal in the Niger Delta, he thought he had done everything right.

With two decades of experience in emerging markets, including Brazil and Russia, he had carefully prepared every step of his Nigerian acquisition. He found experienced local partners, studied his target asset, did his due diligence with the help of the Canadian government and made 46 trips to Nigeria over a four-year period.

Today, however, Mr. Shefsky is embroiled in a dispute that could see him lose his Nigerian deal. Despite winning a competitive bid and paying the full $453-million into an escrow account, he and his Nigerian partners have seen their new asset subjected to a takeover by Nigeria's state oil company.

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"I feel absolutely sick about it," says Mr. Shefsky, president and chief executive of James Bay Resources Ltd., the Toronto-based company that spearheaded the Nigerian oil acquisition and owns 45 per cent of the company that won the bid.

"I went in with my eyes open and I thought we were doing the right thing. Somewhere in the system, something happened."

Competing against several other bidders, Mr. Shefsky and his Nigerian partner won a bid in June, 2014, to acquire the lucrative oilfield asset from the Nigerian subsidiaries of Shell, Total and Agip, which together owned 45 per cent of the oilfield.

But in October, as he was preparing to hire Shell's former employees at the site, the Nigerian National Petroleum Corp. suddenly announced that it was using its preemptive rights to take over the asset – even though those rights should have expired 30 days after the bidding finished.

The letter from the state company, dated Oct. 27, did not give any reason for the decision. It simply ordered Shell and the other two companies to "assign" and "transfer" their interest to the state company.

Mr. Shefsky says he is mystified by the decision, since about 20 similar divestment deals have gone ahead without preemption. He suspects there are more than just business factors at play. "I believe it involves politics," he said in an interview on Monday.

With that in mind, he has hired a high-profile Canadian lawyer, Robert Amsterdam, who has acted for wealthy politicians in Russia, Thailand, Nigeria, Zambia and elsewhere, including the dissident Russian oil tycoon Mikhail Khodorkovsky.

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In a press release, Mr. Amsterdam cites the possible role of corruption in the Nigerian case, along with another factor: the March 28 presidential election that now preoccupies every Nigerian politician, including the oil minister who holds ultimate authority over the state oil company.

"The timing of all of this behavior, right before an election, is very suspicious," Mr. Amsterdam said in an interview in Johannesburg on Monday.

Nigerian elections often revolve around huge sums of money, which greases the wheels of the election machinery for the leading parties, and some insiders believe that the Canadian asset was seen as an easy way for the ruling party to raise money quickly.

Mr. Shefsky and his Nigerian partners have gone to court to block the takeover of their asset. On Friday, they obtained an interim injunction in a court in Lagos. Another hearing is scheduled for later this month on whether the injunction should remain in place until a full trial is held.

"We made a legitimate investment," Mr. Shefsky said. "Shell and the others felt we were the best. We outbid the other bidders. There was a wrongful preemption."

Mr. Shefsky is "courageous" for fighting the case in the courts, Mr. Amsterdam said. "There are so few Canadians willing to take that entrepreneurial risk," he said. "I think it's incredible that a Canadian investor is staying to fight, instead of folding his tent."

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It's not clear what will happen with the $453-million. If the Canadian company and its Nigerian partners lose their case in court, they would probably be able to recover most or all of the money from the escrow account, but this could depend on the results of further potential court action.

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