Between Adeosun, Oando and Gwarzo

The illegal suspension of the Director-General of Securities and Exchange Commission (SEC), Mounir Gwarzo, by the Minister of Finance, Kemi Adeosun, did not only expose the minister’s complicity in shielding Oando from SEC’s regulatory axe but also opened the Pandora’s box that will lead to crash of the oil giants. Nothing justifies the Economist’s November […]

The illegal suspension of the Director-General of Securities and Exchange Commission (SEC), Mounir Gwarzo, by the Minister of Finance, Kemi Adeosun, did not only expose the minister’s complicity in shielding Oando from SEC’s regulatory axe but also opened the Pandora’s box that will lead to crash of the oil giants.

Nothing justifies the Economist’s November 2015 scathing verdict that Adeosun is “poorly qualified for the job” than her meddling in SEC’s regulatory activities and by extension eroding investor confidence and lowering the estimation of Nigeria’s capital market in the eyes of the world. 

What Kemi Adeosun wanted Gwarzo to do was to circumvent regulatory principles and adopt “administrative” ways to dress up what may pass as a Ponzi affair in the garb of a blue chip company.

Gwarzo’s crime is ordering for the forensic audit of Oando after receiving two petitions over alleged distortion of its shareholding structure and mismanagement of the company’s financial affairs.

SEC conducted a comprehensive review, which revealed massive breaches of the provisions of the ISA and the SEC Code of Corporate Governance for Public Companies.

Why should a minister who coordinates Nigerian economy want SEC to ignore, to the detriment of the 274,400 shareholders of the company and Nigerian economy, the “going concern” of the company. Going concern in Oando, as stated by its auditors, means the company will not be able to continue operating for a period of time to carry out its commitments, obligations, etc.

No one with national (not regional) interest at heart would want insider dealings such as the sale of 1.21billion shares amounting to N21.5billion to be swept under the carpet. With access to confidential information to its advantage, Oando traded 1.21billion shares even before the release of the 2014 accounts (which revealed a loss in excess of N180 billion). 

Every market feeler knows that there is a cause for alarm over a labyrinth of related party transactions mostly involving the CEO of Oando Wale Tinubu whose company paid between 2012 and 2016 for 7 out of the 27 the sum of over N200billion. 

To prove that Oando’s paw is deeply trapped in related-party transaction jar, the instances are not far-fetched. For example, on 29th November 2012, Oando Plc acquired 100% of the share capital of Churchill Finance Limited (a company incorporated in Bermuda). Churchill’s sole shareholder was the GMD of Oando Plc, Mr. Adewale Tinubu and its main asset was a Bombardier Challenger 300 aircraft. Oando Plc recognized goodwill from acquisition in the sum of N2.34 billion from this transaction, on the date of acquisition (29 November 2012).

The act of acquiring an asset (the aircraft) from the GMD of the Company (Mr. Adewale Tinubu) and 32 days later recognizing a loss in value of the asset raises serious conflict of interest issues and points to a failure of governance structures and internal control. As it would appear that the asset may not have been worth the value attached to it ab initio.

Further impairment losses of N838 million and N493 million on goodwill from acquisition of Churchill were recognized in Oando’s accounts for the years 2013 and 2014 respectively and the impairment write-down carried out by the company from 2012 to 2016 amounted to approximately N202.7 billion. There are other several cases.

SEC’s findings also show discrepancies in the shareholding structure and breach of several SEC law (ISA) and rules by Oando.

As the regulator and watchdog, the commission, sequel to this damning discovery, placed the company’s shares on technical suspension in the Nigerian Stock Exchange (NSE) and appointed a team of experts, consisting of auditors, lawyers, stockbrokers and registrars, to conduct the forensic audit.

Against the claims by the minister and the acting DG of SEC that the forensic audit would kick off in earnest, the fact of the matter is that no forensic audit is taking place or about to take place in the SEC. Inside sources revealed that they are toying with the matter for it to be overtaken by events.

The claim that a court had stopped SEC from conducting forensic audit is far from the truth. On October 24, 2017 Oando sought an interim injunction to restrain SEC and NSE from conducting forensic audit and implementing the technical suspension but on November 23rd, 2017, the Federal High Court struck out the application for lack of jurisdiction to hear the matter and directed Oando to seek redress from Investments and Securities Tribunal. 

Evasive and cunningly dodgy, the embattled company applied to the same Federal High Court on December 13, 2017 for an interim injunction pending the hearing of the application at the Court of Appeal. Still unlucky, the court struck out the case for lack of merit on December 15, 2017. Now the question is: where does the purported court order emanate from? The bitter truth is that the case is yet to be even heard, let alone granting order restraining SEC from conducting the forensic audit.

Another pretext the minister and the acting SEC latch on is the alleged non-release of funds by the Capital Market Development Fund (CMDF). The fund was set up by SEC to assist in achieving its dual mandate of investor protection and development of the market. It was incorporated as a limited liability and the composition of the board was approved by the minister of finance. 

At its meeting on Monday October 30th, 2017, the Board of the CMDF approved the conduct of the forensic audit, engagement of the consortium and payment of N160million as their fees. In attendance at the meeting were DG of SEC Mounir Gwarzo; Director of Home Finance, Federal Ministry of Finance, Mrs Olubunmi Siyanbola; representatives of the shareholders association in persons of Dr Farouk Umar and Sir Sunny Nnamdi Nwosu; representative of the Institute of Capital Market Registrars, Dr David Ogogo; representative of Association of Stockbrokers, Ms Ify Ejezie; and representative of Association of Securities Exchanges, Mr Ayodeji Balogun. 

In expressing viewpoints, one credo every reasonable person should hold dear to heart is removing the cataract of ethnic and religious sentiments to look at issues dispassionately. Much as one detaches himself from giving the crisis an ethnic coloration, Adeosun’s actions and inactions as supervisory minister of the commission are clear pointer to her culpability in the matter.

Periscoping the Kemi Adeosun/Mounir Gwarzo saga from unprejudiced position, one draws inference that the minister is clearly shielding her kinsmen from probe, against national interest.

A cursory look at the at ethnic background of the minister Mrs Kemi Adeosun, the Chairman- Oba A. Gbadebo, CFR , GMD- Adewale Tinubu  and the acting DG of the commission, Abdul Kemi Zubair, speaks volume of the minister’s spirited efforts to save the company from regulatory gallows. Their action or inactions clearly vindicate Mounir Gwarzo  who was suspended to ensure administrative patch rather than the forensic audit which remain in the cooler three months thereof.

 

Mr Sanda is Abuja-based financial analyst.