How Nigerians lost N18bn to MMM, ponzi schemes


The Securities and Exchange Commission has revealed that over three million Nigerians have lost about N18bn through Ponzi schemes.

The Director-General of the  Commission, Lamido Yuguda, disclosed this on Tuesday, at a two-day webinar organised by the Attorney General Alliance-Africa in collaboration with the Securities and Exchange Commission (SEC).

Ponzi schemes are fraudulent investing scams which generate returns for early investors with money taken from later investors.

They are similar to pyramid schemes in that both are based on using new investors’ funds to pay the earlier backers.

The SEC DG said the devastating impact of the COVID-19 pandemic on the Nigerian economy, the low-interest rate environment, coupled with the increased use of online services to interact and transact, has helped the proliferation of ponzi schemes through the offering of unrealistic returns on investment to unsuspecting investors.

He noted that the SEC has a statutory duty to promote investor education and the training of persons in the capital market, saying that the programme is organized in furtherance of that statutory mandate.

“This capacity building programme will afford participants the opportunity to learn contemporary and innovative ways of combating and curbing the menace of Ponzi schemes in Nigeria,” he said.

“I believe the knowledge gathered from this programme will provide participants new ways of approaching, assessing and tackling the growing problem of ponzi Schemes.

“The pervasiveness of ponzi schemes undermines regulatory efforts in developing the capital market, and also negatively impacts investor confidence.

“Ponzi schemes operate with unsustainable operating models that ultimately lead to huge losses for investors. Following the collapse of the MMM ponzi scheme, the Nigerian Deposit Insurance Corporation (NDIC) had estimated that over 3 million Nigerians lost about N18 billion Naira. Several other illegal investment schemes have cost Nigerians their assets and life savings.”

Yuguda said the commission’s efforts in addressing ponzi schemes are therefore geared towards investor protection and preserving market integrity, saying the Nigerian capital market should be a safe destination for investors.

In his remarks, Abubakar Malami, minister of justice, said the federal government will clamp down on ponzi scheme operators.

Malami said ponzi schemes are different from legitimate investment opportunities, as the perpetrators take advantage of their fellow citizens.

He said ponzi scheme operators thrive on trust and inflated promises which has not economic justification.

“They are usually people who are very good at what they do and they thrive on trust and friendship promising easy cash in the short term and financial succour to the naïve. Ponzi scheme is an operational, social and economic risk and the fight against it is now a war, and in fact a full blown war. It is everywhere, not peculiar to us,” he said.

“The investment climate is not simplistic, it can be highly sophisticated and that is why the law regulates the space to ensure that the requisite duty of care by operators is not breached in any way, that there is a proper disclosure as required by law and that there is a generally level playing field for all stakeholders.”

In his address, Markus Green, AGA-Africa board member, noted that due to the pandemic, businesses are operated online and criminals have taken advantage to attract people to ponzi schemes.

“We bring in experts from the United States to combine with others in Africa for training on these activities and how to curb them. COVID-19 has changed the way we do business but it has not stopped us from our work,” he said.