For decades, Ponzi schemes have preyed on the financial aspirations of people across the world. However, in Nigeria, these fraudulent investment models have found particularly fertile ground. From the infamous MMM (Mavrodi Mundial Moneybox) to the more recent CBEX scam, countless Nigerians—especially from the lower economic class—have fallen victim to promises of high returns on investments. The losses have been staggering, often running into trillions of naira, and the consequences have been emotionally and economically devastating.
While law enforcement agencies like the Economic and Financial Crimes Commission (EFCC), the Securities and Exchange Commission (SEC), and others continue to promise restitution and clampdowns, one persistent question remains: are Nigerians inherently gullible, or are they driven by greed and a desire to escape poverty quickly?
As Nigerians who invested in the CBEX scheme look forward to possible relief from EFCC and other regulatory agencies, TVC News Senior Digital Executive, Wasiu Salami writes on “Ponzi Schemes and the Nigerians’ Experience”
Understanding Ponzi Schemes
A Ponzi scheme is a form of investment fraud in which returns are paid to earlier investors using the capital of newer investors, rather than legitimate profits from investments. The scheme relies heavily on a continuous influx of new participants to remain viable. Eventually, when recruitment slows or stops, the scheme collapses, leaving the majority of investors with heavy losses.
The term “Ponzi scheme” originated from Charles Ponzi, an Italian swindler operating in the United States in the 1920s, who duped thousands of investors by promising 50% returns within 45 days through investments in international postal reply coupons. His model became the archetype for countless similar schemes around the world.
Nigeria’s Tryst with Ponzi Schemes
Nigeria’s first major encounter with a Ponzi scheme came with MMM in 2016. Founded by Russian fraudster Sergei Mavrodi, MMM promised 30% monthly returns on investment. The scheme gained massive popularity in Nigeria, attracting millions of participants and billions of naira in investments. When it inevitably crashed, it left countless families in financial ruin.
Since then, several other fraudulent schemes have emerged: Pennywise, Moneywise, Ultimate Cycler, Loom, and more recently, CBEX. Each has exploited the same human vulnerabilities—desperation, trust, and the illusion of financial empowerment.
The CBEX scheme, short for CryptoBase Exchange, posed as a cryptocurrency trading platform offering unrealistic returns. It drew in thousands of Nigerians, including celebrities such as popular Fuji music star Taye Currency, lending the scam an air of credibility. Investors were led to believe they were engaging with cutting-edge fintech, only to realize too late that it was yet another elaborate con.
Why Are Nigerians So Vulnerable?
Several factors contribute to the persistent victimization of Nigerians by Ponzi schemes:
Poverty and Economic Hardship: With a high unemployment rate, inflation, and unstable currency, many Nigerians are in a constant struggle to make ends meet. When faced with such hardship, the promise of quick and easy wealth becomes extremely enticing.
Low Financial Literacy: Many Nigerians lack the basic knowledge of how investments work. Terms like “ROI,” “blockchain,” and “cryptocurrency” are often thrown around by scammers to confuse and entice uninformed investors.
Distrust in Traditional Financial Institutions: For many, banks and government institutions are seen as corrupt or ineffective. Ponzi schemes, on the other hand, often present themselves as community-driven, inclusive, and independent alternatives.
Social Proof and Peer Pressure: When people see their friends, family, or even celebrities claiming to make profits, they feel encouraged to invest as well. The fear of missing out becomes a strong motivator.
Greed and the Get-Rich-Quick Mentality: For some, the allure isn’t just survival—it’s the hope of rapid wealth. This mindset is fueled by success stories, often fabricated or exaggerated, that portray Ponzi schemes as golden opportunities rather than ticking time bombs.
The Aftermath: Consequences of Ponzi Schemes
The fallout from Ponzi schemes can be catastrophic. Beyond the obvious financial losses, victims often suffer psychological distress, depression, and loss of trust in others. Relationships are strained or destroyed, businesses collapse, and reputations are ruined.
Ponzi schemes also harm the national economy. They siphon money away from productive sectors into a black hole of fraud. Furthermore, they erode confidence in legitimate investment platforms and financial institutions.
Government Response and Challenges
The EFCC, SEC, and other regulatory bodies have repeatedly warned the public against dubious investment platforms. Crackdowns and arrests have been made, and in some cases, partial restitution has been achieved. However, these efforts are often reactive rather than preventive.
One of the biggest challenges lies in the digital nature of modern Ponzi schemes. Many operate through social media and encrypted messaging platforms, making them difficult to trace. Additionally, enforcement is hindered by corruption and bureaucratic inefficiencies within the system.
The Way Out: Combating Ponzi Culture in Nigeria
To break the cycle, a multifaceted approach is required:
Financial Education: Government, NGOs, and private institutions must invest in widespread financial literacy campaigns. Schools, churches, and community centers should teach basic financial principles and critical thinking skills.
Strict Regulation and Monitoring: Regulatory bodies must be empowered to swiftly identify and shut down suspicious schemes before they spiral out of control. Tech platforms should also be held accountable for allowing scam advertisements and promotions.
Empowering MSMEs and Entrepreneurs: If citizens are offered genuine opportunities to earn, invest, and grow their wealth legally, the temptation to fall for scams will reduce.
Community-Based Warnings: People trust their communities. Local leaders, religious figures, and influencers must take it upon themselves to speak out against Ponzi schemes and promote verified investment channels.
Stronger Legal Frameworks: Existing laws must be updated to address the realities of digital fraud. The perpetrators of Ponzi schemes should face severe penalties to serve as a deterrent.
Conclusion
The recurring cycle of Ponzi schemes in Nigeria is a reflection of both systemic economic challenges and human vulnerabilities. While greed may play a role, it is too simplistic to blame victims entirely. Desperation, ignorance, and misplaced trust are often at the heart of these financial tragedies.
To truly end the plague of Ponzi schemes, Nigeria must address the root causes—poverty, poor financial education, and weak institutions. Until then, the promise of easy money will continue to lure many into the jaws of financial ruin.
