Wednesday, December 20, 2006

Nigeria: Cadbury Nigeria's Cooked Books

by Ryan Shen-Hoover

Candy and drink-manufacturer, Cadbury Schweppes, found out that life really is like a box of chocolates last month. It didn't know what it was getting when it upped its shareholding in Cadbury Nigeria earlier this year, and it turned out to be a lot worse than a coconut creme. It discovered “significant and deliberate” earnings overstatements at Cadbury Nigeria going back to 1997.

It only came to light when Schweppes retained PricewaterhouseCoopers to review the accounts. Cadbury Nigeria’s previous auditors were Akintola Williams Deloitte (AWD), who incidentally also failed to discover financial improprieties at Nigeria’s Afribank.

Cadbury Nigeria will likely record a loss of $15 million on the year, and CEO Bunmi Oni and his finance director were quickly sacked for their roles in the scandal. (Ironically, Oni’s peers had recently selected him as one of Nigeria’s most respected CEOs.)

Needless to say, Cadbury Nigeria shares have been hit hard on the Nigerian Stock Exchange. They immediately dropped 5% of their value (the maximum allowed in one trading day). As of this writing they are down over 26% since the scandal broke.

The fact that such shenanigans could carry on undiscovered for such a long period is disturbing. Sadly, it will reinforce perceptions of Nigeria as hopelessly corrupt. But with US$ returns of 36% over the past year, foreign investors will find the potential rewards of investing on the NSE hard to resist.

I personally, however, would be wary of firms audited by Akintola Williams Deloitte.


Anonymous said...

Alternate Headings:

Cadbury's bitter chocolate

The Dentist is in Town

Earnings not sweet enough

Anonymous said...

I beg to differ on the fact that Nigeria is hoplessly corrupt. I would rather say that investors should pay more attention to governance indices as they invest in Nigeria and also do more research before investing. The Enron, Parmalat and Onetel sagas occurred in seemingly stable and uncorrupt nations and this did not hinder the plunder of company finances.

Ryan Shen-Hoover said...

Seye - Excellent point.

The Kabaka said...

I think the country is damn corrupt, but i would not know if there is a strong correlation between corrpt governments and company misgovernance. Some relationship should however be there because in a corrupt country the governance of most enities seems to be compromised. That does not mean you wont get your Enron, Vivendi, Parma or even companies which fail due to managment miscalculations like LTCM which was under the auspices of noble prize winners in finance.

But Nigeria is corrupt, so are Kenya and Uganda. The three probably top Africa's corruption table.

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Somebody is always cooking the books a some far off way place.