Foreign venture capital firms killing Nigerian business, group cries out

By Dike Onwuamaeze

The Business Founder Coalition (BFC), which is made up of Nigerian entrepreneurs has cried out to the federal government to protect Nigerian enterprises from being hijacked by foreign predatory venture capital firms in disguise of equity investments.

The BFC also advocated for a better investment climate that would protect local entrepreneurs from foreigners and urged government to put in place policies that do not allow foreign investors to have controlling rights in a Nigerian founded business.

It also called on the government to look into the development of a Nigerian venture fund that would support the growth of local businesses and ensure that all legal contracts to guide foreign equity investments in any Nigerian enterprise are domiciled in Nigeria.

The promoters of the BFC said: "The present inadequate laws of the land, which allow for the complete 'fleecing' of Nigerian businesses who brave welcoming foreign investments, must stop! Putting in place a local entrepreneur protectionist structure will not stop any genuine investor."

The membership of the coalition, which addressed a media briefing recently was made up of the Founders of Synlab Nigeria (Formerly Pathcare), Mr. Richard Ajayi; Wakanow - Mr. Obinna Ekezie, and Mr. Ralph Tamuno; Healthplus - Ms. Bukky George; Chicken Republic - Mr. Deji Akinyanju and Filmhouse Cinemas - Mr. Kene Mkapru.

Ajayi, who is the spokesperson of the BFC, said the coalition's objective is to draw the attention to the plight of Nigerian entrepreneurs, "who out of sweat and grit started their business but at some point in the pursuit of growth, have had to access venture capital funds or foreign investments.

"Our experiences have largely been 'tales of woes,' which has the possibility of stunting the growth of indigenous businesses like ours. We are also hoping that through this coalition, government can enact policies and laws that will correct that apparent lop-sidedness."

He stated that most of indigenous entrepreneurs were constrained by prevailing unfavourable and unavailable access to local financing to approach foreign investors and venture capitalists to grow their business.

"Entrepreneurs in Nigeria do not have many options for growth capital, bank loans are prohibitively expensive with a high interest, which is if you can get a bank to lend you money. So, when you are talking to only one investor, which is usually the case, you really are between the 'rock and a hard place'. You either take the money on the onerous terms or you watch your business dreams evaporate like many have done.

"They (foreigners) usually seek for controlling rights as one of the conditions to invest. But, against the 'spirit of the letter,' they often use this to wrestle control from the founders and force their positions, which can be inimical to the growth of the business and overall national development."

He added: "As a coalition we appreciate that there are many good private equity companies, but unfortunately, there are some who come into Nigeria literally to hijack our companies.

"Our intention therefore is to lead the charge in drawing attention to this unwholesome practice and advocate for a better investment climate for Nigerian entrepreneurs," Ajayi said.

The coalition said foreign investors make lots of promises beyond funding only to renege at the most crucial time of the growth.

He referred to the current case between the founder of HealthPlus and the allegedly on-going attempt by the primary investor who is a foreigner, to take over the business from its Nigerian founder.

Ajayi alleged that this was as an emerging pattern that could kill local businesses and entrepreneurs because the deal structure is such that, "they will easily have control of the business and when they renege on those agreements, there is little you can do apart from instituting a legal process with all the attendant challenges."

The BFC, therefore, called on the government to put policies in place that would local entrepreneurs that are linked to strategic sectors and national champions.

Ajayi said that FDI protectionism policies are need to prevent squeeze-out provisions as is obtainable in Egypt where foreign ownership stake is limited at 49 per cent in strategic sectors.

This article originally appeared on BBC News

Photo: FinIntell