Largely unheralded for a long
time, Ponzi schemes came to the consciousness of the entire nation in 2016.
With the descent of the Nigerian economy into its first full depression in over
two decades, many embraced the rise of these money-spinning schemes as a way
out. At the height of its fame, Mavrodi
Mundial Movement (MMM), one of the most popular, had over three million
Nigerians on its subscriber list.
Despite the crash of this and
many others that came after it, many are still succumbing to the lure of Ponzi
schemes. In this piece, the Research/Development Unit of Yudala, Nigeria’s
fastest growing e-commerce outfit – x-rays why Ponzi schemes remain popular in
spite of their clear and present dangers.
1.Mouth-watering
and quick returns: In its hey-day, MMM offered Nigerians huge
interests on their investment, as much as 30% within a period of 30 days. Hence,
an investment of N100,000, for instance, was bound to earn the investor about
N130,000 in addition to other bonuses that will reportedly accrue. Same template was followed by the tons of
other Ponzi schemes that followed; each looking to out-do the other in the
terms offered. In the view of many, not even the banks or other financial
institutions can match such returns.
2.Slick
marketing: The operators of the various Ponzi schemes all
have one thing in common: the ability to present the benefits of the scheme in
glowing terms. Take the example of Twinkas, another very popular investment
scheme that gained huge popularity when MMM suspended operations in December
2016: “It’s not a get-rich-quick scheme. It’s ‘get-rich-quicker’ through
systematic effort and the compounding of effort through groups of people.”
Another one, Joyful Donor which promised 100% returns on investments within 24
hours, claims to “connect donors to impact and outcomes increase satisfaction
and giving.”
Many Nigerians have fallen for
these slick marketing techniques at their own peril…
3.Tough
economic climate: Nigeria fell into its full recession in 29 years
at the turn of last year. Data from the National Bureau of Statistics (NBS),
the Central Bank of Nigeria (CBN) and other data agencies revealed that the
economy experienced its first full-year recession due to drop in oil output to
a 27-year low and reported paralysis in other sectors, mainly as a result of
foreign exchange shortages.
With job losses in various sectors and inflation
rising to double digit figures, many distraught Nigerians were in desperate search
of a lifeline. In came all manner of Ponzi schemes promising incredulous returns
on investments. These schemes, with
newer ones popping up and dropping off on a regular basis, remain quite popular
among Nigerians.
4.Free
(and massive) publicity: When it discovered the huge number of
Nigerians being drawn into the risky net of Ponzi schemes, the Nigerian
government and its regulatory agencies decided to sound a note of caution.
Various public financial and anti-graft institutions, including the Central Bank
of Nigeria (CBN), Securities and Exchange Commission (SEC), Nigerian Deposit
Insurance Corporation (NDIC) and Economic and Financial Crimes Commission
(EFCC) repeatedly warned that the schemes are fraudulent and that those
investing in them may lose their money. Commendable as the warnings were, it
also inadvertently played into the hands of the operators of these schemes by
making them more popular.
5.Lucrative
referral system: Ponzi schemes thrive on promises of extraordinary
returns through a system which relies on regularly recruiting loads of new
subscribers or investors for it to remain afloat. As a result, attractive
incentives are offered to “Guiders” or those who succeed in recruiting new
investors.
As conspicuously displayed on the website of one of these schemes:
“You get 10 per cent from all deposits of the participant you invited. Inviting new
members into the Community is your additional contribution to its development.
But nobody force (sic) the members of
the Community to invite new participants. But at the same time, understanding
that the network can’t exist without development and participants’
encouragement in the form of referral bonuses motivate many people to take an
active position.” Slick, isn’t it?
6.Faceless
and sophisticated nature of operations: The NDIC revealed the sheer
scale and popularity of a particularly (in)famous Ponzi scheme when it
disclosed that, an estimated three million Nigerians
lost N18billion when MMM suspended payment to investors last December. This has
not deterred operators from floating other numerous investment schemes and
ensnaring more gullible “investors” in its unsustainable fold.
Recently, the
Dangote Group raised the alarm over another Ponzi scheme in circulation
alleging partnership between the “Dangote brand, Nestle, Cussons and other
reputable food processing companies” in launching a multi-level marketing
initiative that intends to “fight hunger, poverty and stop recession” by paying
participants in food.
Most Ponzi schemes are run by
faceless individuals who boldly disclaim any forms of liabilities on their
websites. Indeed, it is believed that most of these schemes, although painted
as distinct with different marketing pick-up lines, operations and branding,
are actually run by the same set of individuals out of choice locations such as
Dubai and the United Arab Emirates. Most of these chaps are young and
digitally-savvy individuals, for whom the absence of the risk of discovery and
legal consequences means a chance to float more of these dubious investment
schemes.
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