By Nnamdi Ojiego

Worried at the prevalence of fraudulent activities and rate in which Nigerians were losing billions of naira in the hands of criminals masquerading as investment ‘portfolio managers’, experts from various sectors of the economy have given poverty, greed, and lack of financial education, among others, as reasons people continue to fall for ponzi schemes.

Ponzi scheme, according to Investopedia, is a financial arrangement where investors contribute money to the portfolio manager who promises them a high return, and are paid out with the incoming funds contributed by later investors. The money is not invested in anything but just moves around and when there is no more money, the scheme crashes.

It is estimated that Nigerians have lost about N300 billion in the last few years to ponzi schemes. In 2016, three million investors lost about N18 billion to the infamous Marvodi Mundial Movement (MMM) and most recently, people lost about N17 billion to the MBA Trading & Capital Investment Limited, another N22 billion to the couple running Imagine Global Solutions, and about N47 billion to Chinmark investment among many others such as Chymall and Qnet.

The speakers who spoke at a PennyTree Twitter Space, on the topic, “Ponzi Schemes: Why Do Nigerians Keep Falling?”, noted that due to the rising inflation, unemployment, and quest to make more passive than active income, people have turned to investment schemes for their monetary goals.

This, the discussants opined, has made people easy prey to scams and schemes that have them losing their money investing in ponzi and pyramid schemes.

Contributing, a disruptive innovator and Co-founder at PennyTree, Mr. Adeleke Awotayo-Ayeni, explained that while some people were innocent victims of ponzi schemes, many others made a conscious choice to invest their money in it.

“For a first timer, I can say it’s a mistake, maybe, due to misinformation, and lack of financial education but when you fall for a scheme a second time, it means that the victim actually recognized the risk and decided to take it”, he stated.

Adeleke, an advocate of financial inclusion, stressed that financial literacy was one of the most important factors that could contribute to the prevention of ponzi schemes, warning that people should stop investing in business ventures they didn’t know much about.

“Ponzi schemes promise outrageous returns that no legitimate business would be able to provide. People just want to make quick cash without necessarily working for it; they would prefer to invest money and get double the amount within a short time.

“Again, often, people forget that just like any skill, you need to have the financial knowledge to make sound decisions. For example, a person with zero financial literacy would fall for any investment that would offer a huge return. Financial education will help people understand the modus operandi of the ponzi schemes and how they can prevent it.”

Speaking further, the Fintech entrepreneur disclosed that the most common way to recognize s ponzi investment was through unrealistic and outrageous profits promises.

Adeleke said: “I think the most common way of recognizing ponzi is when the predators start making unrealistic profits that is way beyond imagination. That’s just a common trait to all the ponzi schemes. It is also a ponzi when there is no clear business model or asset attached to the investment.”

Earlier, the host, Elizabeth Okaome, had explained that the programme was organized by PennyTree, a fintech company with a strategic focus to accelerate the expansion and adoption of financial products and services leveraging technology, to expose the modus operandi of ponzi schemes with a view to preventing people from falling victims.

She said the need to discuss the issue has become necessary considering the negative effects the fraudulent business activities on the lives of millions of Nigerians who have been swindled of their hard-earned money.

According to her, part of what PennyTree was doing was to increase the financial literacy of people by teaching them how to detect fraudulent transactions as well as how to make wise investments. PennyTree’s Twitter Space holds every Friday at 7pm, to discuss trending issues as they affect the people and proffer solutions when necessary.

Others who also spoke at the event include Ayo Ogunowo, Co-founder at PennyTree; Yomi Akande, developer and Tech Lead at PennyTree; and Ash Aliu, brand coach and content creator, among others.

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