Part 1: The Ponzi Schemes in Nigeria: A History of Exploitation
3 min read
Ponzi schemes, fraudulent investment scams promising high returns with minimal risk, have plagued Nigeria for decades. These scams have capitalized on economic vulnerabilities and the public’s desire for quick wealth. From the infamous Mavrodi Mondial Moneybox (MMM) in the mid-2010s to the more recent CBEX controversy, Ponzi schemes have caused financial ruin, shattered trust, and revealed regulatory gaps. This section explores their history, mechanics, and impact on Nigeria.
The Origins of Ponzi Schemes in Nigeria
Ponzi schemes in Nigeria date back to pre-digital times, with early examples such as the Umana-Umana platform in Port Harcourt and Calabar, Planwell in Edo, and Nospecto in Lagos during the 1980s and 1990s. These “wonder banks” enticed investors with promises of rapid returns, only to collapse when new investments ceased. A lack of strong financial regulation, coupled with widespread poverty, created a perfect environment for these fraudulent activities to thrive.
The MMM Phenomenon (2015–2017)
The modern era of Ponzi schemes in Nigeria was marked by the introduction of MMM in November 2015. Founded by Russian conman Sergei Mavrodi, MMM portrayed itself as a “social financial network” where members would “provide help” to one another, with promised returns of 30% per month. The scheme gained massive traction during Nigeria’s worst recession in decades, as inflation surged and banks restricted credit. The timing was perfect: millions of Nigerians, from farmers to professionals, flocked to MMM, hoping for a financial lifeline.
MMM’s aggressive marketing strategies, utilizing community forums, churches, and social media, contributed to its rapid expansion. In the beginning, participants enjoyed payouts for personal needs like rent and school fees, blinding them to the looming risks. Despite warnings from the Central Bank of Nigeria (CBN) and other regulators, many Nigerians ignored the red flags.
By December 2016, MMM froze all accounts, citing a “system overload” to prevent issues during the holiday season. The resulting collapse caused widespread devastation. The Nigeria Deposit Insurance Corporation (NDIC) estimated losses at N18 billion, while the CBN pegged it at N12 billion. The aftermath included suicides, broken families, and ruined lives. However, the lesson was short-lived, as new Ponzi schemes quickly followed.
The Post-MMM Surge: A Cycle of Scams
The MMM collapse did little to discourage Nigerians, as economic hardship and financial illiteracy spurred a wave of copycat schemes. Between 2016 and 2021, platforms such as Twinkas, Ultimate Cycler, Get Help Worldwide, Loom, Racksterli, and MBA Forex defrauded billions from Nigerian investors. Twinkas promised to double investments within days, while MBA Forex (operating from 2018 to 2021) defrauded investors of N213 billion by pretending to be a legitimate forex trading platform. Agricultural crowdfunding scams also gained traction, offering high returns masked as legitimate investments.
By 2022, the NDIC estimated that Nigerians had lost N911.45 billion to Ponzi schemes and similar frauds over 23 years, with N300 billion lost in the five years following MMM’s collapse. Other notable scams like Nospecto (N106 billion) and Galaxy Transport (N7 billion) added to the mounting financial devastation. Although the Economic and Financial Crimes Commission (EFCC) arrested individuals like Emmanuel and Victoria Jaiyeoba, who defrauded investors of N935 million, convictions were rare, and recovery of funds was minimal.
About The Author
