HOW NAIRA HIT OANDO BELOW THE BELT.

When Oando PLC released its 2015 annual report not too long ago, it turned out that the external auditors did the unexpected: It drew shareholders attention to a matter it considered worth emphasising.

It declared that "...conditions along with other matters, indicated the existence of a material uncertainty which may cast significant doubt on the group's ability to continue as a going concern"

The issue that led to this statement was the fact that by 2015 Oando's working capital deficit was N247.9bn. The auditors feared that this was too huge a liquidity burden.

However, by 2015 close, the Naira still officially exchanged for N197 to the dollar officially and prior demands could still be met although at a slower pace.

Neither the external auditors nor Oando management anticipated the subsequent free float of the Nair through the established interbank market alongside OTC for futures.

And so, when the Nair's dropped at the market to N282 to the dollar, the real threat to going concern status emerged.

According to Oando, in a warning notice to investors, the potential loss of billions of Naira needed to service its dollar denominated loans.

According to the notice, Oando was owing $261m as outstanding bank trade facilities as well as vendor payables.

There was $68m in core loans, $89m as bank trade facilities, $87m in asset financing and $21m other payables. In view of this, Oando explained, the half year figures are likely to be affected by debits needed to service these loans at new exchange rates.

Yet even at N282 to the dollar, down 26.6% on its hitherto controlled rate, the Naira was yet to find a bottom. This week it dropped further to N292 to the dollar representing 32.5% drop on 2015 year end official rate.

Decoded: For Oando, and other companies like La Farge Africa, the jugular blow from the Naira is not just a once and for all blow, but continuous hammer on the exposed jugular till further notice.

Well, Oando is hopeful it can swim the turbulent tide and remain a going concern in spite of fears of its auditors.

It is hoping that since the bulk of the loans were expended on foreign operations, hard currency earnings in the near future should make it easier to service and repay the loans in question.

May be but the point is that it would have been a lot easier if the Naira value blow had not been delivered and the potential was there that it was one off.

No doubt, it will help greatly if these loans can be restructured as well.

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