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When Greed Meets Desperation: Inside Nigeria’s Ponzi Trap

In what is akin to the more-you-look, the less-you-see scenario, many Nigerians are falling victim to investment scams, where promises of outrageous returns on investments are turning into life-threatening blunders by desperate Nigerians who are turning deaf ears to strident warnings by the Securities and Exchange Commission, writes Festus Akanbi
In its agenda-setting ritual, the Securities and Exchange Commission (SEC) last week indicated its resolve to strengthen regulations against investment fraud, particularly Ponzi schemes, which it said would be its top priority in 2025.
In his New Year message to the capital market community, SEC’s Director-general Emomotimi Agama emphasised the need for enhanced detection, prevention, and accountability mechanisms to protect investors and maintain market integrity.
Agama highlighted several key areas of focus for the year including investment fraud (Ponzi schemes), insider trading, and transparency. He said the SEC plans to revamp its investigative processes to improve the detection of fraudulent schemes and hold bad actors accountable.
Already SEC is proposing a N20million fine and jail terms for Ponzi scheme operators to protect Nigerians from illegal fund managers. The agency proposed this in the Investments and Securities Bill (ISB) 2024, which was recently passed by the National Assembly to repeal the SEC Act. The bill also seeks an express prohibition of Ponzi/pyramid schemes and other illegal investment schemes in the country.
In his opening remarks at a recently held Public Hearing in Abuja, Senate President, Godswill Akpabio, said the Investment and Securities Bill 2024 is not merely a legislative document but a beacon of hope for the nation’s economic landscape.
Represented by Senator Binos Yaroe, Akpabio said by repealing the Investment and Securities Act of 2007, the nation is taking a bold step towards modernising its financial markets, fostering transparency, and enhancing investor confidence.
As Nigerians Count Losses
According to a media report, Nigerians lost over N93.72 billion to Ponzi schemes and other financial fraudulent activities between January 2023 to December 2024, which the report said brings the total amount lost to over N1trillion in 25 years. Scams and fraudulent schemes continue to exploit loopholes and unsuspecting victims and the rising trend has sparked concerns over the need for stricter regulations and public awareness to curb the growing horror.
The Ninth National Assembly passed the Investment and Securities Bill, which includes provisions for possible jail sentences for those who promote Ponzi schemes in Nigeria.
However, for reasons best known to former President Muhammadu Buhari, the bill wasn’t signed before he left office despite the former SEC Director-General, Lamido Yuguda’s expectation that he would.
In the fresh bill which has been returned to the National Assembly, it was proposed that promoters and operators of any entity engaged in a prohibited scheme commit an offence and are liable on conviction to a penalty of not less than N20,000,000 or imprisonment to a term of 10 years or both.
Illusion of Quick Wealth
In the desperate pursuit of financial liberation, countless Nigerians fall prey to the alluring promises of Ponzi schemes, which dangle the illusion of quick wealth before them.
Entrapped by economic hardship and unemployment, they invest their life savings, borrow recklessly, or even sell treasured possessions, all in the hope of a brighter future. But when these schemes inevitably collapse, they are left broken – financially, emotionally, and socially.
The shame of their gullibility often feels unbearable, especially when family and friends, who trusted their recommendations, also lose everything. Stripped of dignity and haunted by unrelenting debt, many victims spiral into despair, with some tragically considering suicide as an escape from the suffocating judgment and hopelessness. Their cries go unheard in a society too accustomed to these tragedies, where empathy fades and lessons remain unlearned.
THISDAY investigation showed that scammers usually target civil servants and pensioners looking for cheaper investment options although reports said desperate individuals with an appetite for sudden wealth are spared from the gimmick of the con artists.
A Lagos-based school teacher, Mrs. Adenike Ojo (not her real name) was contacted on the phone in early December 2024 by a caller who claimed to have got the teacher’s phone number from a colleague. The woman who claimed to have sold her scheme to over 2,000 teachers in Lagos State listed three categories of the investment plan ranging from N50,000 to N200,000. She gave the name of the scheme as Diamond Projects and she said the company trades in health products. All the subscribers need to do is transfer a certain amount of money to a dedicated account and expect an interest payment of over 60 per cent monthly. However, Mrs Ojo became suspicious when the scheme vendor began to mount pressure on her victim to do the transfer.
The lid was open when the name of the company could not be found in the SEC’s register.
If Mrs Ojo was lucky, some other victims were not. For instance, on Monday, October 14, 2024, a team of operatives of the Enugu Zonal Directorate of the Economic and Financial Crimes Commission, EFCC, comprising four officers were at Urban Radio 94.5FM, Enugu to invite one Favour Ekoh, host of Prime Time, a programme running at the Station.
Ekoh is being investigated by the Enugu Zonal Directorate of the EFCC in an alleged N700million Ponzi scheme fraud involving about 50 victims. According to the victims, Ekoh allegedly lured them into investing in a scheme “Life Trading” in a company, Leverage Index Limited, where they were offered returns on investment of 10 per cent of their capital after some time.
The victims alleged that after investing their money into the company located at No. 1 Colliery Street, Okpara Avenue, Enugu State, the company closed its office with no return on investment or principal returned to the victims. Ekoh allegedly invited the victims into the business and she remained the only link the victims could hold.
Ekoh had to be trailed to the Station for arrest because the nature of the fraudulent dealings necessitated a sting operation that would foreclose her escape or go underground.
A Stitch in Time…
The SEC has stressed that transacting in the Nigerian capital market with unregistered and unregulated entities exposes investors to financial risks, including fraud and the potential loss of investment, and expressed its commitment to protecting investors in the Nigerian capital market while working diligently to curb scams and other fraudulent activities.
Sources said many promoters of Ponzi schemes have devised the strategy of rebranding once their organisations are flagged by the regulatory authorities in their bid to extend their dragnets to more unsuspecting victims.
The most infamous scheme across Africa, MMM attracted over three million Nigerian subscribers, who collectively lost about $50 million when it crashed in December 2016. MBA Forex, a homegrown scheme that promised 15% returns, defrauded Nigerians of about $500 million when it folded in 2021. This accounts for nearly 50% of the total funds lost to Ponzi schemes in Nigeria in 10 years.
The SEC says over 70% of the cases it handles are related to Ponzi schemes. These schemes thrive due to economic hardship, the quest for easy cash, and financial illiteracy. Weak regulatory laws and poor enforcement mechanisms further expose Nigerians to various forms of fraudulent schemes that erode local and foreign investor confidence.
Although not the first Ponzi scheme in Nigeria, MMM unveiled the general vulnerabilities of Nigeria’s investment market and ushered in myriad similar peer-to-peer donation schemes. These include Loom Money, Twinkas, and others. Most originated outside Nigeria but with the help of local actors. Loom Money was reported globally with names such as ‘Loom Circle’ and ‘Blessing Loom’. In Nigeria, Loom Money operated via Facebook and WhatsApp in 2019, promising 800% returns on investments in 48 hours. It crashed the same year.
Winning War against Ponzi
To win the war against Ponzi schemes, the Nigerian government must prioritize financial literacy and public awareness campaigns to educate citizens on identifying and avoiding fraudulent investment opportunities. Strengthening regulatory frameworks and ensuring strict enforcement of laws against financial fraud are critical to deterring perpetrators. Collaboration between financial institutions, law enforcement, and regulatory agencies like the SEC (Securities and Exchange Commission) is essential for monitoring suspicious activities and swiftly shutting down illegal operations. Additionally, providing access to legitimate investment opportunities and improving the economic landscape can reduce the desperation that drives many Nigerians into the clutches of Ponzi schemes.