Hundreds of shareholders in Cadbury Schweppes’s Nigerian subsidiary have launched a class-action lawsuit over an accounting scandal that took the shine off the confectionery giant’s performance in 2006.

Less than a month after Cadbury said that the UK salmonella scare and Nigerian accounting irregularities had hit full-year profits, more than 300 shareholders are suing the board of Cadbury Nigeria and its auditor for breach of duty.

They are also suing for access to a review carried out by Pricewaterhouse-Coopers.

The shareholders, joined by a Lagos-based stockbroking firm, Maxifund Investments and Securities, claim that they “suffered a huge loss” as a result of the overstatement of Cadbury Nigeria’s financial position and that the defendants failed to act in their interest.

The case is believed to be the first of its kind in Nigeria, which is trying to shed its image of corruption to attract foreign investment.

Corporate governance experts say that a successful outcome could also encourage greater shareholder activism in Africa and other emerging markets, where plaintiffs may be deterred by the cost of such lawsuits and the time they take to reach court.

Cadbury said in December that it had discovered “a significant and deliberate overstatement of Cadbury Nigeria results, which had existed over a number of years” after increasing its stake in the business from 46.4 per cent to 50.02 per cent last February.

The Nigerian chief executive, Bunmi Oni, who was named by PricewaterhouseCoopers as Nigeria’s “most respected CEO” in September, and the finance director, Ayo Akadiri, were “relieved of their positions”.

Last month Cadbury said that the Nigerian business knocked £53 million off its earnings in 2006, including a £23 million exceptional charge and a £15 million goodwill impairment charge.

“It’s remaining a big red number in their accounts,” said Charlie Mills, a food analyst at Credit Suisse. “Cadbury Nigeria will lose money again this year. This isn’t a one-off. This is a business which they have now bought which is actually losing a lot of money.”

A lawyer for the Nigerian shareholders, who did not wish to be named, said they wanted Cadbury Nigeria to publish the company's correct accounts and PwC to publish its report.

“This is the first case of its kind in Nigeria,” he told The Times. “The directors have to come to court. We want them to explain exactly what happened with that company. We want PwC to tell us how they did their job. The report hasn’t been made public and we are interested in what it stated.”

Nsongurua Udombana, one of the plaintiffs, said they wanted to make other shareholders aware of their rights.

“We are trying to see if we can establish a precedent and start something that could bring a revolution in corporate governance in Nigeria,” Professor Udombana, who teaches international law at the University of Lagos, said. “It certainly cannot be business as usual. We hope that this will be a lesson not only to Cadbury but to other companies in Nigeria.”

Philip Armstrong, director of the World Corporate Governance Forum, said: “Shareholder activism in Africa, as in most emerging markets, is something that is not well developed. It’s encouraging to see this sort of action. I think it would serve as an example that could possibly encourage other similar actions.”

Neither Cadbury Schweppes nor PwC would comment.

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