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Oando under fire from Nigeria's SEC

The future of one of Nigeria's flagship energy companies hangs in the balance

A two-year battle over financial irregularities between Oando—one of Nigeria's largest indigenous oil and gas operators—and the country's Securities and Exchange Commission (SEC) reached a crescendo in May, when the capital markets regulator ordered the firm's entire board to resign.

The SEC said it had made the move in response to manipulations of the company's fiscal position. In addition, it barred Wale Tinubu and Omamofe Boyo, the chief executive and his deputy respectively, from holding corporate office in Nigeria for a five-year period.

"There were several corporate governance lapses stemming from poor board oversight," the regulator said in documents relating to its investigation. It also chronicled a failure of internal controls and other issues arising from the sale of Oando Exploration & Production Limited (OEPL) to Green Park Management Ltd, a Nigeria-based energy and infrastructure firm, in 2013. The SEC said the sale had been made without gaining its necessary permission.

"The purported sale of OEPL enabled Oando to report a profit instead of a loss, thereby misstating its financial statements in 2013 and 2014, and consequently misleading investors. This 'fictitious' profit reported in 2013 enabled Oando to declare dividends," the commission said.

Two of Oando's board members have resigned in accordance with the SEC directive, ahead of an extraordinary general meeting to appoint new directors.

However, Tinubu and Boyo are attempting to overturn the SEC efforts to dismiss them via a lawsuit brought through Oando. On 24 June, a federal court in Lagos adjourned the case until 22 July.

Oando claims it was not given a chance to review the audit report and prepare its defence, saying its listing on the Johannesburg stock exchange, as well as in Lagos, is proof of its compliance with corporate governance standards.

Should the company lose the case, the market credibility of Oando will be further dented—it still owes part of its $2.5bn debt from a 2014 acquisition of assets from US multinational ConocoPhillips. That purchase helped turn Oando into one of sub-Saharan Africa's largest indigenous energy companies.

Shareholder attack

The controversy was ignited in 2017, when two influential shareholders petitioned the SEC over allegations of financial irregularities at the company. They were Dahiru Mangal, a philanthropist from the same state as Nigeria's president Muhammadu Buhari, and Panama-registered Ansbury Investment, a company backed by Italian-Nigerian billionaire Gabriele Volpi, who aims to gain control of Oando.

Mangal dropped his petition in January 2018 after an intervention by former central bank governor Sanusi Lamido, who is now Emir of Kano. However, Volpi's petition remained in place.

Should the company lose the case, the market credibility of Oando will be further dented

In 2018, a London arbitration court ruled that Volpi's Ansbury was owed $680mn by two companies controlled by Tinubu and his deputy Boyo. One of those firms was Oando's majority shareholder, Ocean and Oil Development Partners (OODP), which is incorporated in the British Virgin Islands.

It is unclear if there is a political motivation for Volpi beyond his business interests. He is a leading shareholder in oil services and logistics company Intels Nigeria, alongside former vice-president Atiku Abubakar of the People's Democratic Party (PDP).

In the 2019 presidential elections, Abubakar came second to Buhari, the incumbent, who was standing for the ruling All Progressives' Congress (APC). The national leader of the APC, Bola Tinubu, has been lobbying Buhari for Oando's Tinubu to be petroleum minister. The two Tinumbus are not related by blood.

Is the end nigh?

Wale Tinubu has faced a string of challenges during the rise of Oando and could yet survive this one, especially given the high political stakes surrounding the success or otherwise of one of the country's most high-profile businesses. However, even if the executives do manage to regain full control of the company, it is unclear whether it can survive in its present form.

An April 2019 report from EY, the company's auditors, which was included with Oando's 2018 financial statement, made uncomfortable reading for the board. It said there was "material uncertainty, which may cast significant doubt on the company's ability to continue as a going concern and, therefore, the company may be unable to realise its assets and discharge its liabilities in the normal course of business."

EY said that Oando's current liabilities at the end of the reporting period had exceeded current assets by 63bn naira ($175mn).

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