Thrive Agric defaulted on its crowd-sourced investment commitments, creating the typical scenario which the Securities & Exchange Commission (SEC) Nigeria has been warning people for years. People had invested with promises of fixed percentage returns. But when Covid-19 came, Thrive Agric went into extended coma as farming systems froze. Unfortunately for the startup, the investors were promised an amount, and they rightly expected to be paid.
To cause more pain for the investors, Thrive Agric insurer, Leadway Assurance, just put out a statement, informing the world that it only insured the farms, not the individual deposit’s money. That complicates the whole system.
Expect the SEC to draw the hammer here and fines could fly. Unless Thrive Agric could raise money, and pay these investors, it could be in real troubles as the loop has been broken. Yes, not many people would be open to invest new resources, bringing the business model into paralysis.
That said, as individual investors, we need to understand the risks in these investments. Agriculture is a tough business and when someone is promising high returns, you need to understand the risks. The fact is this, running business operations in Nigeria at the moment is expensive. So, margins may not just be there for high payouts, no matter the promises on paper. Of course, that is not to say that people should not be paid as put on contracts.
Largely, this is a case study why government is not stupid when they put these regulations which many of us hate. Government wants to protect your N1 million and you are angry you cannot be allowed to get your “guaranteed N200k” yearly returns on your own money. Now, a bad thing has happened, and everyone is asking the government for help.