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Opinion: The SEC’s actions against Oando not only hurt the company, they hurt Nigeria

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  • On Friday, the Securities and Exchange Commission (SEC) released the results of its forensic audit into Oando PLC on its website.
  • The report alleges that Oando is guilty of false disclosures, market abuses, misstatements in financial statements, among other things.
  • The SEC sat on this report for six months without engaging Oando.
  • Acts like this not only hurt companies, they hurt the whole country.

On Friday May 31, 2019, the Securities and Exchange Commission (SEC) released the results of its forensic audit into Oando PLC on its website. One of the outcomes of this incidence is that the SEC has barred the Group Chief Executive Officer (GCEO) and the Deputy Group Chief Executive Officer (DGCEO) of Oando Plcfrom being directors of public companies for a period of five (5) years.

Oando responded to this report in a statement on its website. The energy company called the allegations in the report “unsubstantiated, ultra vires, and invalid and calculated to prejudice the business of the Company.”

The statement further highlighted that the SEC did not give Oando the opportunity to see or review the report, making it impossible to “ascertain what findings (if any) were made in relation to the alleged infractions and defend itself accordingly before the SEC.”

This, is in fact, correct. According to a source, the forensic audit report was ready and submitted by Deloitte and Touche as far back as December 2018. However, for six months, the SEC sat on the report without engaging Oando. It is only now just acting based on a report the company had not yet seen, the source says.

“We were not given a chance to review and respond to the outcome of the report. You do not sentence a person to death without giving him or her a chance to defend him or herself. In this instance we have been sentenced to death without knowing what our crime is or being given a chance to defend ourselves. At the barest minimum, best practice requires that you give the person a chance of a fair hearing. We have not been accorded this opportunity,” Chief Operating Officer, Oando Energy Resource, Dr Ainojie ‘Alex’ Irune, said.

Commenting on this issue, Atedo Peterside, founder of Stanbic IBTC, asked why the SEC did not share the findings of the forensic audit with Oando and give them an opportunity to defend themselves. He also asked the SEC to share the forensic audit findings and Oando’s response with the public so people could make up their minds and see for themselves.

The question then is, is this a case of the abuse of power? According to the guidelines of the SEC, Mary Uduk, as acting DG of the SEC was meant to submit her findings to the Board of the SEC. However, there has, in fact, been no board since Mounir Gwarzo (who was under suspension until a few days ago) was appointed Director-General of the regulator. Considering this and the fact that the SEC did not show Oando the report despite having it for six months, the SEC really could have done better.

How does this affect the Nigerian business climate?

Nigeria has a reputation for a being a hostile place to do business and this does not help. Think about the NCC’s just resolved case with MTN. And now this. It does not help the government’s push to move up the Ease of Doing Business rankings.

Since the current administration came to power in 2015, Nigeria’s business climate has been one of their primary focuses, with Vice President Osinbajo often mentioning the slightest progress on the rankings during public gatherings. Moreso, President Buhari has reiterated in the past that one of the priorities of his government is to make Nigeria one of the most attractive and easiest places to do business. This drive led to the creation of the Presidential Enabling Business Environment Council with the aim of removing anything that hinders business and economic activity.

However, situations like this (with the SEC and Oando) affect how foreign investors view and do business in Nigeria. It makes it more difficult for FDI to flow into the country, which in turn will negatively affect the exchange rate, making it more difficult for local and multinational companies to do business, increasing the prices of goods and raw materials in the market, and consequently making life more expensive for everyone.

Back in 2013, Nigeria’s foreign direct investment inflows totalled $5.6 billion, most of it in the telecom and energy sectors. However, the figure fell to $2 billion in the last quarter of 2018. This negative view of the Nigerian business climate was the subject of a recent Forbes article titled ‘Nigeria has Become Africa’s Money-losing Machine’.

The author, Kenneth Rapoza, begins by saying, “Want to lose money in one of Africa’s biggest markets? Put it to work in Nigeria.” He also says, “It’s Nigeria’s abundant commodity resources that make it so big. But it’s Nigeria’s government that keeps it from getting bigger, and richer.”

So, the SEC’s actions not only hurt Oando, they hurt the whole of Nigeria — they hurt reality and they hurt perception, both vital factors for succeeding in business. These kinds of moves will always affect how investors see Nigeria and, at the moment, things aren’t looking good.