Oando Plc Mitigates Profit Decline With N226bn Tax Credit

In a quick defensive move, Oando Plc dodged a major profit slump in 2025 by securing a tax credit of over N226 billion, giving it the boost it needed to weather the challenges of a tough year.

Another boost against the profit decline came from finance income, which surged over eightfold during the year, adding more than N381 billion to earnings.

The unaudited financial report of the energy company for the full year ending December 2025 reveals that declining sales revenue dominated the year, further worsened by rising costs and significant losses on financial assets.

Oando’s challenges deepened in the final quarter as production costs once again surpassed sales revenue, just like in the same period of the previous year. Sales revenue for the quarter fell to N671.5 billion, a 25 per cent drop from N897 billion recorded in the fourth quarter of 2024.

Production costs fell more slowly during the period, dropping 19 per cent to N756.8 billion, which led to a gross loss of over N85 billion for the quarter. This wiped out much of the N113 billion gross profit recorded at the end of the third quarter, leaving just N27.7 billion for the full year.

Gross profit for the year is a drop of 82 per cent from the preceding year’s record of about N156 billion.

The full-year figures reveal a 21.4 per cent drop in turnover, falling from N4.09 trillion in 2024 to N3.21 trillion in 2025, marking a return to declining sales revenue after three years of solid recovery and growth.

The company’s management excused the loss of sales revenue on a deliberate reduction in low-margin refined product trading. Yet supply and trading of products accounted for 85 per cent of the sales revenue for the year.

Management’s de-emphasis of refined products trading appears justified, however, by its contribution of operating loss of N26 billion for the year, which was overwritten by operating profit of N90.5 billion from exploration and production.

In the final quarter, three positive developments boosted the full-year results, including an additional income of about N47 billion, which reduced other losses from over N287 billion at the end of the third quarter to N240 billion by year-end.

In 2024, most of the company’s other income came from foreign exchange and other gains, shooting up to N1.10 trillion. But in 2025, things turned around with a fair value loss on financial assets of N311.6 billion, smaller foreign exchange gains, and no bargain purchase, which had been a major contributor to the previous year’s other income.

In the final quarter, the third pillar of the performance boost was a 35 percent reduction in administrative expenses, bringing them down to under N192 billion. For the full year, the company managed to slash administrative costs by 54.5 percent to N278 billion.

Thanks to favorable cost and income trends in the final quarter, the figures shifted from an operating loss at the end of the third quarter to an operating profit for the full year. The last quarter brought in about N160 billion in operating income, compared to the N109.7 billion loss at the end of Q3, resulting in a full-year operating profit of over N50 billion.

The operating profit for the year took a steep dive, dropping 91 per cent from last year’s impressive figure of nearly N570 billion.

The company’s finance expenses on its N3 trillion interest-bearing debts rose from about N236 billion in 2024 to over N465 billion by the end of 2025. However, finance income surged even more, jumping eightfold to N381 billion, which slashed net finance expenses from N188.6 billion to just N36 billion over the same period.

Strong finance income, combined with the reversal of previous interest charges of N48 billion, kept interest expenses from eroding the slim operating profit. A modest pre-tax profit of N15 billion remained, but an unexpected income tax credit windfall turned the company’s fortunes around far beyond expectations.

An income tax credit of N226 billion replaced the previous year’s tax expense of N163.7 billion, masking operational shortcomings and making the bottom line appear far more impressive.

Oando’s bottom line soared to over N241 billion, built on a strong base of income tax credit. This translated to earnings per share of 30 kobo, up from 18 kobo per share the year before.

There’s still little for shareholders to celebrate, with a long road ahead before any dividend payout. The negative equity gap in the balance sheet has widened from around N361 billion in 2024 to about N554 billion by the end of 2025.

Looking ahead, management’s main challenges are filling the negative equity gap and reshaping the cost-income structure to generate solid profits from core operations.