CO-CREATED CONTENT As CBN Sustains its Battle Against Unlicensed Financial Operators
Data recently released by the Security and Exchange Commission (SEC) show that in the past five years, Nigerians have lost over N300 billion from speculative and dubious unlicensed financial operators or Ponzi schemes as it were.
One of the most successful Ponzi schemes in Nigeria was the Mavrodi Mondial Money (MMM). A lot of Nigerians believed in it and saw it as a legitimate investment until went under, taping in excess N15bn in Nigerian funds. Some of the other Ponzi schemes Nigerians lost speculators lost fortunes to include: Yuan Dong, Galaxy Transport, Famzhi Interbiz Limited, Cowlane, Dureil, Nospecto investors among theirs.
In spite the sustained warnings from the Central bank of Nigeria and the SEC for Nigerians to desist from patronizing those dubious ventures, greedy and gullible Nigerians have continued to defy these warnings and have had their fingers burnt. These patronages have emboldened these fraudsters who have taken their trade further. Some of these fraudsters even have the temerity to now place advertisement on radios, podcasts and other social media platforms, calling for participation in their dubious companies’ various investment plans, which included: logistics/bike investment, customer relationship management investment, education virtual reality for students’ investment, location sponsorship investment, real estate and independent investment, offering incredible returns hovering between 60 to 110 percent. These quanta of promised returns that should immediately raise red flags sadly have been the biggest attraction to the greedy speculators. Not even the EFCC Special Fraud Unit (SFU) investigations of some Ponzi scheme operators have stopped their trade.
As part of efforts to address fraudulent financial activities of some dubious characters, the management of the Central Bank of Nigeria (CBN) has warned the public to stop patronising unlicensed institutions in the country.
The CBN is equally worried that these illegal financial operators whose activities have continued to spread launched a coordinated sensitization effort to stop the scammers, with support from the Economic and Financial Crimes Commission and the Securities and Exchange Commission.
Recently, the CBN Governor, Mr. Godwin Emefiele, in Yola, at the 2022 Central Bank of Nigeria Fair reiterated the CBN’s resolve to go after the fraudsters. Even as he warned members of the public to avoid those schemes from unlicensed investments operators
Represented at the twoday sensitisation programme by the Director, Cooperation communication Department, CBN, Mr Osita Nwanisobi, Godwin Emefiele, said that the programme is being conducted concurrently in Adamawa and Taraba.
He stressed that records at their disposal is showing that many Nigerians are becoming victims of these ungodly scammers.
In a similar exercise in Akure, the Ondo State Mr. Nwanisobi, took the crusade there on a similar fair
Nwanisibo who reiterated the need for Nigerians to be mindful of who they transact business with said only the banks accredited by the CBN should be patronized.
These latest CBN efforts in the nationwide campaign against Ponzi schemes is to deepen previous efforts including regulatory circulars it has issued in the past.
Adding to the CBN’s efforts, the SEC has also intensified actions against the Ponzi schemes. The Director General of the Securities and Exchange Commission, Mr. Lamido Yuguda recently said that the continued activities of Ponzi schemes are a threat to the protection of investors, the functioning of a fair and orderly financial market.
He said Ponzi schemes operators have capitalized on the harsh economic climate to offer unrealistic returns on investment to unsuspecting investors. These illegal schemes have also been able to solicit new investors and expand their operations through the increased use of online services.
“The pervasiveness of Ponzi schemes undermines regulatory efforts in developing the capital market, and also negatively impacts investor confidence.
“Ponzi schemes operate with unsustainable operating models that ultimately lead to huge losses for investors. Following the collapse of the MMM Ponzi scheme, the Nigerian Deposit Insurance Corporation (NDIC) had estimated that over 3 million Nigerians lost about N18 billion Naira. Several other illegal investment schemes have cost Nigerians their assets and life savings” he stated.
Also, at a recent post-Capital Market Committee (CMC) media parley, the Director-General of SEC, Lamido Yuguda, urged Nigerians to stay away from fake financial experts who promise to double their money within a short time.
He said the commission would intensify efforts to clamp down on promoters of these illegal investment outfits in the capital market, in addition to its commitment to zero tolerance for infractions.
“SEC has warned that Nigerians should be careful about investing in these fraudulent outfits. People that put their money in wonder banks are still complaining. Government should go and find out who is behind these schemes. Again, the government should make the capital market more liquid so that people will not look for alternatives.”
Recently, Prof. Uche Joe Uwaleke, a Fellow of the Chartered Institute of bankers of Nigeria said the Commission, in pursuance of its mandate, took the right step in shutting down some firms or organizations involved in capital market activities without registration, some of which were established to be Ponzi schemes.
“Bear in mind, that most of the time any such action by SEC is at the instance of members of the public who have been swindled by these ponzi or network oriented schemes that promise unrealistic returns on investment. Come to think of it, what genuine investment scheme will be promising investors between 25% and 50% return per month, or at least 300% per annum, in an economy that exited recession not too long ago. Their modus operandi is not different from the fraud called MMM that led many to early graves. At the time, both SEC and the CBN had issued several warnings concerning the dangers of investing in MMM but some people wouldn’t listen and when the bubble eventually burst, they had themselves to blame” he explained.
He advised that “Nigerians should be wary of network marketing schemes which are ponzi in nature. It is easy to identify them: they have a pyramid structure where an investor’s return is dependent on the number of people introduced to the scheme. Secondly, such schemes promise unrealistic returns.”
Prof. Uwaleke in another for a said ponzi schemes tend to flourish during periods of economic downturn and are prevalent in societies with high rates of unemployment and poverty.
He said this is because these conditions render a lot of people vulnerable to money-doubling tricks fraudulently packaged to escape economic hardship.
“It was not surprising therefore that the MMM scheme spread like wildfire during the period of economic recession in Nigeria. It was a scheme that was promising investors as much as 30 per cent return monthly or 360 per cent per annum in an economy where the average annual return on investment was around 16 per cent at the time” he noted.