Lamido Yuguda, director-general of the Securities and Exchange Commission (SEC), says three million Nigerians lost N18 billion to ponzi scheme operators. He was speaking on Tuesday, at a two-day webinar organised by the Attorney General Alliance-Africa in collaboration with the Securities and Exchange Commission (SEC).
Ponzi schemes are fraudulent investing scams which generate returns for early investors with money taken from later investors. They are similar to pyramid schemes in that both are based on using new investors’ funds to pay the earlier backers. Speaking at the webinar, Yuguda said,
“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 had estimated that over three million Nigerians lost about N18bn.”
The SEC DG said the devastating impact of the COVID-19 pandemic on the Nigerian economy, the low-interest rate environment, coupled with the increased use of online services to interact and transact, has helped the proliferation of ponzi schemes through the offering of unrealistic returns on investment to unsuspecting investors.
He noted that the SEC has a statutory duty to promote investor education and the training of persons in the capital market, saying that the programme is organized in furtherance of that statutory mandate.
“This capacity building programme will afford participants the opportunity to learn contemporary and innovative ways of combating and curbing the menace of Ponzi schemes in Nigeria,” he said.
“I believe the knowledge gathered from this programme will provide participants new ways of approaching, assessing and tackling the growing problem of ponzi Schemes.
“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.”
Yuguda said the commission’s efforts in addressing ponzi schemes are therefore geared towards investor protection and preserving market integrity, saying the Nigerian capital market should be a safe destination for investors.
In his remarks, Abubakar Malami, minister of justice, said the federal government will clamp down on ponzi scheme operators.
Malami said ponzi schemes are different from legitimate investment opportunities, as the perpetrators take advantage of their fellow citizens.
