Seven popular firms were listed to have incurred the sum of N21.53 billion in the first half of 2023 as legal fees in comparison to the sum of N4.79 billion accounted for in the records in 2022 within the same period. In the biggest economy in Africa, it is a constitutional requirement for all publicly listed firms to ensure their accounts are audited and vetted by independent and legal auditors. Thus, external and legal auditors will scrutinise the bookkeeping accounts of all firms without considering sentimental relationships which might veil their conclusion.
According to data, it was revealed that these firms experience the rate of 348.7 percent increase, collectively in legal fees, in contrast to the same period in 2022. The surveyed firms are Bua Foods Plc, Bua Cement Plc, Dangote Sugar Refinery Plc, MTN Nigeria Plc, Fidelity Bank Plc, Wema Bank Plc and Seplat Energy Plc. The rise in legal expenses is a depiction of the developing legal and regulatory difficulties encountering firms across industries where businesses encounter unprecedented risks.
Profitability, company size, and others influence costs decision.
Previously, in-house legal teams were accountable for the provision of the legal advice to the management of the company. However, the obligation of in-house legal teams has grown to include business strategy, compliance and risk management in recent years. The duration of audit, profitability, corporate risk, industry, company size and others, are the factors that influence the decision of legal fees. In addition, some factors that influence legal costs are the outcomes achieved, reputation, the expertise of the lawyer and the nature of the legal issue.
The highest legal fee of the sum of N14.13 billion was recorded by Seplat Energy Plc in the first half of 2023 from the previous legal fee recorded in 2022 at the sum of N2.42 billion. A letter was issued on March 3rd by the minister to Basil Omiyi, the chairman of the company, stating the withdrawal of the work permit of the CEO alongside his residence permit and visa; before they were restored by the court. Also, the court of appeal overruled the interim orders approved by the Federal High Court on a case reported by Seplat Energy Plc — minority shareholders — in Abuja.
Companies record higher legal fees than the same period in 2022.
It was stated by the firm that on October 3rd, at the Federal High Court, and on October 31st, at the Court of Appeal, the matter will be reviewed. The board asserts its confidence and stated that all associated legal issues will be resolved and the transaction will be authorised. In the first half of 2023, N5.96 billion was recorded for MTN Nigeria Plc as its legal fee in contrast to N1.52 billion that was recorded in the same period in 2022. The telecommunication giant gave account of N1.31 billion contingent liabilities from litigation and claims which is being defended by the group.
There is an increase in legal fees for Fidelity Bank Plc from N215 million accounted for in 2022 to N299 million in the first half of 2023, within the same period. Based on available data, there would not be a material adverse effect on the financial stand of the bank either collectively or individually. Bua Food Plc recorded N497 million as its legal fees in 2023, comparing to the record of N296 million in 2022 while Bua Cement accounted for 225 percent increase in 2023 at N390 million, compared to 2022 record which was N120 million. Also, Dangote Sugar Refinery Plc recorded N114 million in 2023 in comparison to the 2022 records, which was N82 million.
Contributing factors are inflation and cost of doing business.
On the other hand, the legal fee recorded by Wema Bank Plc in 2023 is N145 in contrast to its records in 2022 which was N146 billion; showing a reduction. An equity research analyst at CSL Stockbrokers Limited, Mustapha Umaru, stated that an increase in the cost of doing business, inflation and an increase in awareness are the factors contributing to the increase in legal fees. Umaru added that bank customers are more informed concerning the time value of money and their rights. A senior analyst at Merristem Nigeria, Sodiq Safiriyu, mentioned that there are challenges encountered by Seplat this year regarding issues surrounding the CEO, contract withdrawals and corporate governance.
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