The history of Ponzi scheme and why Nigerians are playing big
Right from the days of money doublers and fraudsters, notoriously known as ‘419’, many Nigerians have always involved themselves in high-risk money-making schemes that usually end badly. But despite the losses over the years, a large number of people, especially young Nigerians are often ready to stake their money in any Ponzi scheme that pops up today.
Ponzi schemes are mostly a fraudulent investment proposition that promises huge returns after participants put their money in a pot that goes round with huge cashouts. The scheme uses the contribution of new members to pay old members until it can no longer pay out pending cashout due to high stakes that eventually crash the scheme.
Nigeria has been undergoing economic difficulty for some time and most people are always on the lookout on how to make ends meet. The hope of high returns from Ponzi schemes has been the reason many Nigerians go for it. They mostly understand the risk, but they can’t help it.
In the recent past, there have been many quick solutions that promised to reward participants handsomely, but they all led to regrets and losses. Starting with ‘419’ (named after a section of Nigerian Criminal Code which criminalizes the act of obtaining anything of value by false pretense), to money doubling or Ponzi schemes, and Multilevel Marketing (MLM), there have been many money messiahs who preached the path to financial freedom but ended up destroying many lives. Though Multilevel Marketing is not entirely bad, it is not regulated and has been hijacked by many scammers.
One of the quickdraws that make these platforms successful is people’s desire to earn extra income and in most cases get rich quickly. The more desperate the people are to make wealth, the easier it is to swindle them.
“One thing about this kind of investment is that you have to know when to invest and when to cashout. If not, the whole thing will collapse on your head,” Godwin Ibe who admits to participating in Ponzi deals pointed out. “I used to lose a lot of money before I learned that secret. Now I just put in the amount that I don’t mind losing and always leave when it’s getting too crowded.”
Although Nigerians had learned their lessons with the traditional fraud schemes and to a large extent, the online scams as well, but when the Ponzi schemes arrived after the economic recession of 2016, many people jumped on them.
MMM (Mavrodi Mondial Moneybox) became the most popular and widely adopted platform where people from all socioeconomic backgrounds poured in a substantial amount of money. It started in November 2015, offering 30% percent returns on all investments per month and network bonus for multilevel marketing before it crashed in 2017, devastating about 3 million participants who lost up to ₦18 billion ($60 million as of March 2017). This caused trauma and more trouble for those who borrowed to invest in the scheme.
With the crash of MMM came tens of Ponzi websites and platforms that sprang up to take its place. They all boasted how they were different and better and people threw caution to the wind. Every voice of reason that warned against the risks was disregarded. Among them were TwinKas, Esusu, CheckBillz, Elite Pay, SureNaira, etc.
It was only a matter of time before they all crashed as well. Participants again nursed their wounds and would probably be willing to risk it again if a new Ponzi scheme were to open up shop today in Nigeria. So why do Nigerians keep falling for the Ponzi scheme? Many Nigerians believe in luck. As long as there’s a chance of winning higher returns, they would stake their money and brace the odds. This is the same reason why sports betting has become one of the most lucrative ventures in the country.
In the end, all they care about is to succeed, or as they would say, ‘make it’.
