PONZIMONIUM: THE RISING SPATE OF QUICK MONEY SCHEMES IN NIGERIA

 

PONZI ALERT: MBA Forex fraudulent Investment Scam (DE)generated a loss of N171 billions in the Nigerian Financial system, this is just deposits and we have not even calculated at the recurring rates needed to re-invest at the lowest interest rate possible.

 

In the 1800s a man and a woman known as Adele Spitzeder a German and Sarah Howe an American started the game changing fraud that would bring down many rich people to their knees. They fleeced investors and promised them high rates of returns for monies invested into their business model. News flash, it crashed and they were arrested.

By 1919-1920 the biggest heist was pulled by the man named Charles Ponzi. Ponzi invited investors to pool a total of $1,800 now worth $24,807 (N10.2 million) using a cumulative price change calculator. With this he started the company known as Securities Exchange Company (SEC). he paid the first set of investors with monies he had kept for that purpose. When the people saw this huge returns on the investment, there was a wild rush. More started coming and he kept paying so long as more people brought new funds. He was caught and sentenced for stamp fraud.

Back to Nigeria, Umana Umana fraud duped many Nigerians promising high returns on savings and just fizzled out after cashing in on the public's’ hard earned incomes. In the last few years Nigerians have lost billions to quick money making schemes. With rising inflation, rising poverty indices and policy somersaults, it is no wonder that many families and households want to cash out in an environment of uncertainty by investing in these quick money making schemes. In 2016 alone, wives and husbands divided their houses because of the lost monies in Mavrodi Mundial  Moneybox aka MMM. Between 2019 to early 2021 another set of billions of Naira were subsumed by the Duo of Baraza Multi-Purpose Cooperative Society and MBA Forex. The only comment from the government agencies in charge of the financial system was that they warned Nigerians about MBA Forex and similar schemes.

THE DRIVING FORCE

Fear of losing the value of the currency saved in Naira, poverty and rising cost of living are seen as a motivation for even otherwise educated and intelligent folks investing their savings in these schemes. I do not blame them and I surely do not see it as greed either. The government created the fertile ground for such creative financial engineering to take place.

Another reason is the lack of good investment options due to lack of incentives. The high cost of doing business is most certainly a de-motivator to new investors in legitimate businesses. High running costs from multiple taxation and poor energy sources are just a tip of the iceberg. Obio Akpor boys-PH, Environmental Sanitation Agencies in Bayelsa, Deebam, Iceland, JVC and all kinds of illicit tax agents in the Niger Delta alone drive commodity prices to the sky!

The option is to multiply the money by pooling it into PONZIs and other pyramid schemes. Just this morning on Brekete family radio and Television a man was recanting how his gratuity of N14 million deposited with Baraza and MBA Forex has developed wings taken flight. In 2017 alone many committed suicide for using “Meeting monies” to invest in MMM.

WHAT DO WE DO?

Educate and sensitize more people by giving them clues on how to identify these quick money making schemes. The media has a very big role to play by not giving the promoters of this kinds of schemes their platform to recruit unsuspecting public. Anyone can fall for this fly speaking and dashing dudes with lots of promises. Continuous education of the mind is key to reducing the incidents.

The government agencies need to wake up to their primary responsibilities of protecting the future of this generation. With growing public debt, we do not need a soothsayer to tell us we are closer to the edge than what we see.

WHAT TO LOOK OUT FOR

1.       High rates of return on deposit. I am not convinced it is an investment, rather it is a deposit open to abuse.

2.       Unclear Business registration documents. The CAC has said it did not register MBA Forex. SEC told us they warned citizens. That is not enough. They should go the full mile to arrest and prosecute. The EFCC and ICPC also need to wake up. The reply of not being a recovery agency is not tenable. You are in charge of financial crime no matter how small, do your work!

3.       Investment options are vague. These companies do not let you understand where the monies come from. MBA said the volatility of the Forex market made them lose all those monies, like seriously?

4.       No clear liability clause in the agreement you sign when depositing your funds. The devil is in the detail so goes the old saying.

5.       No insurance cover for the business. No insurance company will risk their shareholders funds to take up these businesses as clients. Even the NDIC has no kobo deposited when you put your funds their. They do not deduct and remit such funds. Costs you see on the agreements forms are vague.

6.       Capacity of the Operators. When you see a multi billion Naira business, you will know. Its not a rented shop or building. The staffing of the organization and the level of competence is shown on the outside with pride.

7.       IT Equipment. Baraza for example does not have the capacity to manage the kinds of funds they received. You will need a very strong Technological application with a secure back end to manage funds running into billions. Not just any fintech app. Hackers did not see it early otherwise things would have crashed even before take off.

PARTING SHOT

Think again before depositing your future in one basket. In the first lesson of finance, you are told to spread your investment. Do this and guard against ALL risks even in very legitimate business deals.