In the past few years, millions of Nigerians have fallen prey to Ponzi schemes, also known as pyramid investment, that lures investors with high promise of returns, but often end up giving no returns at all, leading to the loss of investor’s total capital.
Financial experts have disclosed that these schemes continue to pose a big threat to investment in the country’s capital market. The Securities and Exchange Commission (SEC), have described Ponzi schemes as “cancer” bedeviling effective operations of the capital market.
The director-general of SEC, Mr. Lamido Yuguda, while speaking at a post capital market committee (CMC) meeting press conference in Abuja, disclosed that the commission had been fighting tooth and nail against Ponzi schemes, where people without licenses extort money from unsuspected victims.
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He disclosed that the Securities and Exchange Commission has partnered with other agencies towards the reduction of access of Ponzi schemes to advertising platforms.
In his words;
“We have been saying that people should only deal with registered operators that have the registration of the commission. You must confirm that an operator is licensed with the commission before you patronize them. We have done a lot of sensitization to discourage people from patronizing Ponzi schemes, but unfortunately, a lot of people still patronize them.
“We have cases reported to us and our enforcement and police until now, have been working on many of these cases trying to resolve issues of investment that have been lost. It is not difficult to recognize a Ponzi scheme. When a return is too good to be true, desist from it”.
In a bid to strengthen the fight against Ponzi schemes in the country, Mr. Yuguda disclosed that the commission is collaborating with the Economic and Financial crimes commission (EFCC) to fight these schemes, as well as tackling money laundering.
Almost every year in Nigeria, there is usually the presence of one Ponzi scheme or the other operating under the guise of a legitimate business, thereby luring investors by promising them huge returns on their investment. These Ponzi schemes run in a cyclic fashion where old investors are paid with the deposits of new investors.
The scheme becomes unsustainable when the backing of old investors eligible for payment exceeds the investments coming into the system, which leaves them with no option but to abscond with investors’ money.
One surprising thing is that a lot of Nigerians seem not to ever learn a lesson from their previous experiences. They seem to have a short memory to forget their ordeals and that of others with these so-called schemes, as they do not hesitate to always try out new ones with the hope that they won’t be like the previous ones.
Today, Nigerians have reportedly lost over N300 billion in Ponzi schemes. The continuous operation of these schemes in the country dampens foreign investors’ confidence, undermines the reputation of the capital market, and also limits the circulation of money which often affects the nation’s economy.
Poverty, lack of financial literacy, and greed have been identified as the major reasons why a lot of Nigerians fall for the growing number of Ponzi scheme operators in the country.
However, the government should work relentlessly to clamp down on these Ponzi scheme operators due to the negative impact it poses on the country’s economy, considering the fact that funds that are meant to support productive activities in the country are taken away fraudulently.