Nigeria’s foreign exchange crisis is forcing a major sweet maker to take bitter medicine.
Cadbury Nigeria, struggling under dollar debt and a devalued naira, plans to convert $7.7 million in loans from its parent company into equity. This move aims to reduce exposure to currency fluctuations and ease soaring finance costs, the company said in a regulatory filing Wednesday.
The debt-to-equity swap, requiring shareholder approval on February 8, is a desperate attempt to stay afloat after years of heavy borrowing.
Strings of losses
Cadbury Schweppes Overseas Limited, controlled by Mondelēz International
Inc., holds a 74.97% stake in Cadbury Nigeria, which says it will issue additional 402 million shares.
Cadbury, burdened by a $23 million loan from Mondelez International, faced crippling interest payments and a dollar shortage. Naira devaluation last year exacerbated the situation, generating massive exchange losses and pushing the company into the red.
After the debt conversion, the parent company’s stake in Nigeria will rise to 79.39%.
The Cadbury case isn’t an isolated one. President Tinubu’s foreign exchange reforms, meant to attract investment, ironically led to a 50% naira depreciation in 2023. Many Nigerian companies, burdened by overseas loans, suffered the same fate, reporting severe losses due to currency revaluation.
Though President Tinubu’s reforms intend to attract long-term benefits, their immediate impact has been harsh. The Central Bank, under Governor Cardoso, is trying to ease the pain by clearing the backlog of dollar demand, hoping to restore investor confidence and stabilize the naira.
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