What would have seemed like a perfectly normal financial report for Niger Insurance looks odd when analysts take a deeper look at the company’s expense reporting in their Q1 financials for 2020.
The Insurance company reported a positive management expense of N620 million in 2020Q1 which helped the company avoid posting a loss before tax of up to -N233.3million when the management expenses is deducted from it operating income.
What is strange is that on the company’s financials, management expenses is expected to be deducted as a company expense and not added as an income. On the contrary, Niger Insurance somehow reported it like an income which is very strange, especially considering that as the name depicts, it is an expense not an income and the company has reported it as and expense for years until 2020.
Between Q1 2016 and Q1 2019, the company reported an accumulated management expense cost of around N1.7 billion which was deducted out as an expense. But suddenly in Q1 2020, the company went from reporting an expense of -N291.46 million to a positive expense of N620 million which adds as an income line rather than deducting as an expense line that it is.
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A further investigation into the notes of the financial report that gave specific details into the management expense line brought even more confusion. The company reported no Director’s emolument, no employee expense and no Auditor’s remuneration, leaving all line items blank as if there were no related cost to these expense lines by the company throughout the first three months of the year.
The company rather reported an expense of N10.6 million for Finance Charges and N344.188 in Other Expenses which fails to add up to the positive inflow of N620 million reported in the income statement as management expense. In fact, once this N354.8 million accrued in management expense is deducted from the operating income, the company is expected to post a loss before tax of -N354.8 million once the positive inflow of 620 million reported as management expenses is ignored.
However, analysts suspect that the N620 million reported as management expense is meant to be reported as -N354.4 million but was erroneously reported as net fair value for financial assets in the financial statement. It will makes sense if the figure reported as net fair value for financial assets is reported as N620 million but there are no notes to the financials prove that this swap will produce a more correct financial report. It is then important for the management of Niger Insurance to correct this potential error.
