Olam Group (SGX: VC2) shares are down 5% on the day. VC2 shares are also down 13% over the past few days. The cause is a claim of a massive foreign exchange fraud in Nigeria. Now, the idea of a financial fraud in Nigeria is not a grand surprise. We’ve those claims about Tingo to consider for example. And all those 419s. But this specific allegation concerning Olam doesn’t seem to quite work. Work in the sense that if it was happening then we’d be seeing things which currently we’re not seeing. Sure, that’s more cynical than simply believing Olam would never do such a thing but it does have that advantage of being appropriately cynical about business in Nigeria.
The allegations: “Reports had emerged that the Department of State Services (DSS) was investigating Olam Nigeria and Olam International’s units, and their associate firms for over $50 billion foreign exchange fraud.” $50 billion is a lot. It’s a lot lot, in fact it’s a massive sum. For the Naira/USD market simply isn’t that big: “The daily FX market turnover which represented the volume of transactions at the official market increased marginally by 3.36 percent to $71.32 million on Tuesday, from $73.80 million recorded on Monday, data from the FMDQ showed.” Sure, the street, or black market, rate is 20% different from the exchange one. The Niara has declined substantially recently. There’re all sorts of fun and games that can be played in such markets. But $50 billion in a $70 million a day market?
Not passing that first smell test to be honest.
Olam Group share price from Google Finance
Of course Olam Group is denying it all furiously: “"The company categorically denies the allegations in the Articles," Olam said in a statement, and said it has directed its audit committee to review the matter.”
The other little test we can apply. Olam Group is valued at 4 Billion SGD. Call that $3 billion US. They’ve not got $50 billion to play with on an FX market. It’s just not the right sort of sum of money.
Of course we would find it incredibly funny if there really was an FX fraud going on as an explanation for what’s happening at Tingo. As we’ve indicated elsewhere might even be the case. So an FX fraud in Nigerian agritech and commodity trading, just not Olam Group.