NIGERIA has witnessed a rise in the number of Ponzi schemes in operation to lure citizens, and students in particular, to invest money using tactics of promising returns and fast, easy cash.
Over 4,000 students at the Osten State University had invested money into schemes run by Mavrodi Mondial Moneybox (MMM), which announced its closure in December 2016. This has left about 3 million Nigerians, including students, without their initial investments totalling US$570 million.
A Ponzi scheme is a fraudulent investment scheme that promises high rates of return with little risk – and for people in want of acquiring cash, these promises sound like the perfect idea for investment. The scheme itself, similar to that of a pyramid scheme, is based on consistently including new investors in order to pay the earlier bankers. However, at some point, the system is bound to fail as there won’t be enough money to go around.
In Nigeria, students are amongst those most likely to be targeted by Ponzi scheme operators. An ailing economy with a large unemployment rate for many people means a struggle to make ends meet. A problem for students worldwide is balancing time in university between academic, economic and social needs.
A tactic used by the MMM was to recruit from and network with student organisations, who would then advertise the investment to students. Using video sharing to boast huge returns, word spread rapidly throughout the campus. Many students borrowed money from relatives and convinced parents to help them invest.
However, the cancellation of the scheme by MMM in December 2016 took a huge toll on students who had invested – it emerged on social media that many had had nervous breakdowns. The university is insisting that students pay their fees in three instalments, or else they will be unable to take their exams, receive results, and graduate.
The Nigerian government has been accused by academics of not taking greater action against widespread harmful investment schemes. Professor Kizito Foloruno, provost of Arts and Humanities at the affected university, insisted that the government should outlaw these types of schemes, as students simply saw the scheme as an “alternative means of escaping from penury and poverty”.
The Nigerian National Assembly convened a series of public hearings on the matter and recommended that the Economic and Financial Crimes Commission immediately arrest and prosecute the principal staff of MMM, outlaw their operations and have all monies reimbursed.