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Blackstone's Schwarzman, Dangote, Vice President Yemi Osinbajo, Buhari and Sanusi meet in Abuja

The vultures and the locusts are hovering

President Muhammadu Buhari said during a visit to the US in July: “We are, therefore, proud destination of choice for United States investments in Africa. I will work assiduously to welcome new investors into our country. I would like to remind you all that we are continuing in major privatisation programme with sectors ranging from telecommunication energy, gas, solid minerals, aviation, health and infrastructural development, but with improved moral architecture. We will also simplify visa procedures based on the principle of reciprocity. May I, therefore, seize this opportunity to formally invite the American business community to take advantage of our liberal trade and investment climate to do profitable business in Nigeria.”

Buhari’s spokesman claimed later that they had secured $13.6bn worth of foreign investment from their US trip.

In June private equity giant The Blackstone Group announced the appointment of Lamido Sanusi as the chairman of the board of directors for its Black Rhino unit. Sanusi is the Emir of Kano and a former governor of the Central Bank of Nigeria.

Blackstone also announced that they are teaming up with Nigerian billionaire Aliko Dangote to invest $5bn in energy infrastructure across Africa.

In late August, Dangote, Sanusi and Stephen Schwarzman, chairman and CEO of Blackstone held a one hour meeting with President Buhari, reportedly about investing in Nigeria. They met earlier with Senate President Bukola Saraki, who told them: “I congratulate you for the first step you have taken in coming to invest in Nigeria and to reassure you that as far as we are concerned, the Senate will give support in any way we can to make legislations that will make investing in Nigeria conducive. One of our priorities in the legislature is to look at the private sector and the business environment because some of our old laws have not been reviewed and that is why we are setting up committees to look at and make it more interesting and attractive to invest in Nigeria.”

Schwarzman and Sanusi meeting Senate President Saraki
Schwarzman and Sanusi meeting Senate President Saraki

Most commentary in the Nigerian media welcomed these developments as much needed to facilitate the injection of foreign capital into the Nigerian economy.

But French economist Thomas Piketty, author of the bestselling “Capital in the Twenty-First Century” argues that: “None of the Asian countries that have moved closer to the developed countries of the West in recent years has benefited from large foreign investments, whether it be Japan, South Korea, or Taiwan and more recently China. In essence, all of these countries themselves financed the necessary investments in physical capital and, even more, in human capital, which the latest research holds to be the key to long-term growth.”

Korean development economist Ha-Joon Chang wrote in “23 Things they don’t tell you about capitalism”: “Virtually all of today’s rich countries used protectionism and subsidies to promote their infant industries. Many of them (especially Japan, Finland and Korea) also severely restricted foreign investment. Between the 1930s and the 1980s, Finland used to classify all enterprises with more than 20% foreign ownership officially as ‘dangerous enterprises’. Several of them (especially France, Austria, Finland, Singapore and Taiwan) used state-owned enterprises to promote key industries.”

Instead in Nigeria, we have a president, supported by the likes of Sanusi and Dangote, holding open the doors for “vulture capitalists” like The Blackstone Group.

Blackstone specialises in leveraged buyouts (LBOs) of companies. This is also known as “vulture capitalism” – for which Mitt Romney, the Republican presidential candidate in 2012, was slated during the campaign because of the time he spent as boss of private equity firm Bain Capital. LBOs involve buying a struggling firm with borrowed money. The debt is then placed on the acquired firm. The Glazer family did this with their purchase of Manchester United in 2005 (although the club was not struggling financially at the time, but a debt-free club ended up with £558.9 million loaded onto it).

The private equity firm then charges the acquired company huge annual “management costs” on top of the debt payments used to pay for the buyout. This means that many companies lay off a huge number of workers to balance budgets, opening themselves up to be profitably resold and their assets stripped and sold off by the vulture capitalists.

In 2005 Franz Munterfering, the chairman of Germany’s Social Democratic Party described private equity firms as “locusts”: “They remain anonymous, they have no face and descend like a swarm of locusts on a company, devour it and then fly on.” He also provided a “locus list” of the firms that he claimed were tearing Germany’s economy apart. They include Blackstone, Carlyle, Goldman Sachs and nine other vulture capitalists.

As the vultures circle over the Nigerian economy, our ruling elite also ask us to pray for a plague of locusts, and paint all this as for the country’s benefit.

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