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When you prepare a set of accounts to International Financial Reporting Standards (IFRS), one of the things you are required to do is disclose any ‘related party’ transactions. The accounting standard that covers this disclosure requirement is IAS 24.

Here’s what the IFRS website says about IAS 24:

The objective of IAS 24 is to ensure that an entity’s financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and profit or loss may have been affected by the existence of related parties and by transactions and outstanding balances, including commitments, with such parties.

A related party is a person or an entity that is related to the reporting entity:

A person or a close member of that person’s family is related to a reporting entity if that person has control, joint control, or significant influence over the entity or is a member of its key management personnel.

An entity is related to a reporting entity if, among other circumstances, it is a parent, subsidiary, fellow subsidiary, associate, or joint venture of the reporting entity, or it is controlled, jointly controlled, or significantly influenced or managed by a person who is a related party.

A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged. If an entity has had related party transactions during the periods covered by the financial statements, IAS 24 requires it to disclose the nature of the related party relationship as well as information about those transactions and outstanding balances, including commitments, necessary for users to understand the potential effect of the relationship on the financial statements.

In other words, if the managers of a company transfer resources to a company that all or one of them is related to, it must be disclosed in the accounts. A simple example of this is the CEO’s wife being awarded a contract to supply food for the company’s AGM. That is a related party transaction.

But notice what the IAS does not say. It does not say such a contract to the CEO’s wife to supply food should not be awarded. Such things are not banned. All that is required is that you disclose them. Why not just ban them since we know such things can cause problems and foster corruption?

This is an example of where the law stops and where human behavior is supposed to take over. If such transactions are banned, the managers of a firm might find new ways to hide them. But by asking them to disclose them in the accounts, it is as if the IAS is trying to prick their conscience to do the right thing. In other words, managers will now be confronted with a question anytime they want to award a contract or transfer resources to a related party – how will this look when it is disclosed to shareholders and the public? What if the press sees that the CEO’s wife got a contract worth N100 million and publishes it, how will this make us look as a firm?

Thus, without banning related party transactions, the requirement to disclose them changes the behavior of the managers of a company. Even if the CEO is tempted to give his wife that contract, he will have to think twice about whether it is worth it.

In theory.

One thing Nigerians like to say is that the country turns established laws on their head such that things that have worked elsewhere fail to work when implemented in the country. What the same Nigerians never explain is why this is so. IAS 24 is a very good example of why such laws don’t work in Nigeria. The simple reason is that the law leaves room for human behavior in the expectation that people will do the right thing for the most part. It is certainly better to design laws this way so that people have a stake in it. Thus, to comply with such a law, companies will design their own internal code of conduct (such as how they verify contractors, legal checks etc) to ensure they do not get into trouble.

But in Nigeria, this is hardly the case. Before IFRS people were behaving in that way i.e. handing out contracts to family members and nothing happened to stop them – shareholders can be bought off with dividends and the press can be bought off with brown envelopes. But the most fundamental point is that it is not illegal to award a catering contract to the CEO’s wife. It’s just not a cool thing to do.

Which brings us nicely to Oando Plc. This is one of Nigeria’s biggest ‘blue chip’ companies with a balance sheet of almost N1 trillion as at December 2016. In any other country, a company like Oando will set standards for corporate governance and others will follow. You can typically measure how business is done in a country by looking at the business practices of its largest and most connected firms.

Come with me to page 66 of the December 2016 Consolidated Financial Statements of the company. This is where the Related Party Disclosures begin. Beginning from subsection vii we get the following:

Other related party transactions include:

  1. Brick House Construction Company provided building construction services worth N89.3 million (2015: N203.9 million). A key management personnel of Oando Marketing Plc (OMP) is a shareholder and director of Brick House Construction Company Ltd.
  2. Broll Properties Services Limited provided facilities management services worth N161.3 million (2015: N146.4million). The GCE has control over one of the joint interest owners of the company.

iii. K.O Tinubu & Co. provided legal services amounting to N2.3 million (2015: nil). K.O Tinubu is controlled by a close family member of the GCE.

  1. Intels West Africa Ltd provided various services worth N1 billion (2015: N1.3 billion) to Oando Energy Services Limited. Intels West Africa Ltd is owned 70% by a joint owner of OODP, the largest shareholder of the Company.
  2. Lagoon Waters Limited, one of the dealers for the sale of petroleum products, purchased petroleum products and liquefied petroleum gas worth N2.31billion (2015: N2.1 billion) from the Group. Lagoon Waters Limited is controlled by a close family member of the GCE.
  3. Noxie Limited supplied office equipment worth N86.3 million (2015: N42.4 million) to members of the Group. A close family member of the GCE has control over the company.

vii. Olajide Oyewole & co. rendered professional services worth N235.6 million (2015: N217.9 million). A close family member of the GCE has significant influence over the firm.

viii. Pine Crest Specialist Hospital provided medical services worth N13.8 million (2015: N9 million). A close family member of the Deputy Chief Executive Officer (DGCE) has control over the company.

  1. Rosabon Financial Services Limited provided transport services worth N27.1 million (2015: N24.2 million) to the Company during the year under review. Rosabon Financial Services Limited is owned by a director of Gaslink Nigeria Limited.
  2. SCIB Nigeria and Co. Ltd. (‚SCIB‛) provided insurance brokerage services worth N1 billion (2015: N0.8 billion) to various members of the Group. A beneficial owner of SCIB is related to the GCE.

xi.Triton Aviation Limited provided management services worth N8.3 million (2015: N656 million) to Churchill C-300 Finance Limited, an indirect subsidiary of the Company. Triton Aviation Limited is owned by the GCE.

xii. Templegate Consultants Ltd. provided architectural services worth N6 million (2015: N26.6 million) to Oando Marketing Plc, during the year. The managing partner of Templegate Consultants Ltd. is related to the CEO of Oando Marketing Plc, a key management personnel of the Group.

xiii. Transport Services Limited (‚TSL‛) provided haulage services to OMP. During the year under review, TSL provided haulage services worth N2.2 billion (2015: N1.2 billion) to OMP. TSL is ultimately controlled by a close family member of the GCE.

xiv. TSL Logistics Limited supplied products and throughput services worth N229.6 million (2015: N2.1 billion) to OMP. The company is ultimately controlled by a close family member of the GCE.

  1. West Africa Catering Nigeria Limited provided catering services worth N281.7 million (2015: N0.3 billion) to Oando Energy Services Limited. West Africa Catering Nigeria Limited is ultimately owned 49.8% by a shareholder of OODP. OODP has controlling share in the Company.

xvi. F.O. Akinrele & Co. provided legal services worth N825,000 (2015: nil). A non-executive director of the Company is the principal partner of the firm.



Nothing illegal has been done. The issue is that IAS 24, which has worked in other countries to change the behavior of managers, has pretty much failed here. The picture this paints is that when the company needs to get something done, the board members get first dibs. It cannot be the case that the company got value for money for these transactions in all cases. And the company is supposedly run for the benefit of its shareholders.

Aviation services contracted to the CEO, billion-naira transport services contracted to a close family member of the CEO, legal and logistics contracts to other family members of the CEO. And so on.

IAS 24 does not say you should not do these things. But it expects you, with a gentle nudge, not to do them. It asks you to disclose them with the hope that you won’t have too many of such things to disclose. It hopes that managers will choose not to disclose this stuff because shareholders will get upset and the press will have a field day with such disclosures.

Instead the managers of the company are running it for their own benefit and disclosing it ‘with their chest’. The law cannot stop you from behaving this way; it can only encourage you not to act in that manner.

This is Nigeria where things that have worked elsewhere get turned on their head.


  1. Regulators, shareholders and the press are equally to blame for this trend. In short, the entire country is waiting its turn to behave likewise. In Nigeria, impunity is not chastised, it is envied.


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