From catch phrases such as ‘want to double your money in 2 days’ to ‘earn 30% on your capital in 60 days’, the struggle to get people to engage in investment scams has tripled since the days of MMM in 2016.
Daily, more than half of Nigeria’s population consume information on get-rich-quick packages and incentives in an economy with skyrocketing inflation, according to Shile Akinjo, Corporate Finance Analyst, Advisory, DLM Capital Group.
“The originators of these scams lure susceptible members of the society to what is called the Ponzi scheme and then disappear after they have ‘cashed out’,” Akinjo said.
Despite consistent warnings from Nigeria’s Securities and Exchange Commission (SEC), Economic and Financial Crimes Commission (EFCC) and the Central Bank of Nigeria (CBN) raising concerns around investment scams, Akinjo, said a larger Nigerian population believe the watchdogs are only trying to suspend their share of the ‘national cake’.
SEC had in May 2019 circulated a notice to Nigerians about patronizing the then fast-rising Ponzi scheme, Loom Money Nigeria. In June of 2019, news about Nigerians storming Loom’s office following the sudden crash of the scam outfit circulated different media publications. The SEC, had also in the second quarter of 2020, listed 12 investment scams’ outfits including the popular MBA Forex and Helping Hands Investment Scheme which fronted as an initiative of the CBN.
By early 2021, investors in the schemes went to Twitter and the media to express frustrations over unpaid returns. To date, DLM Capital said MBA Forex still claims it will mollify investors who lost when the firm crashed. “This shows a large segment of Nigeria’s population possesses an unhealthy attachment to investment scams.”
In a document titled The Hurried Return of Nigeria’s Overnight Millionaires, Akinjo said, contrary to popular opinion, investments are not designed as a get-rich-quick instrument and a great deal of due diligence is required before initiation.
While it is important to note that the scams will likely continue to spring up, DLM Capital has advised investors to seek more clarity on the returns’ claims when approached with an investment portfolio or proposal,
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Monetary Policy Rate
According to the developmental investment bank, one way to gauge if an investment deal is too good to be true is to compare its returns with the national benchmark, the Monetary Policy Rate (MPR). Nigeria’s MPR is currently at 11.50 per cent.
“This explains that investment returns should ideally fall within this range. If an investment deal is offering you less, you should consider investing elsewhere. If they are offering you a lot more than 11.5%, you need to run, literally. This is the fundamental phase to finding out if an investment opportunity is a scam – scrutinize their ROI claims and payment process, Akinjo said.
Licence
According to Akinjo, the next phase of spotting an investment company that may be a scam is finding out if they are licensed as it is never enough to just be registered with the Corporate Affairs Commission (CAC).
All investment platforms are to be registered with the SEC and/or licensed by the CBN. “An investment platform or company without any affiliations with either SEC or CBN should be considered as phony.”
The SEC has provided a portal (http://sec.gov.ng/cmos/) providing information on all licensed capital market operators where prospective investors can conduct due diligence before closing with an investment platform.
“More than often, it is advisable to also verify the credentials of the owners, promoters and originators of the investment opportunity or company and their experience in managing similar investments. This also includes unreservedly considering paid promotions and influencing of these opportunities by celebrities as some of these platforms pay for celebrity endorsements knowing just how much patronage there is to gain. It is crucial to run checks on the company to validate any links to fraud charges,”
Exit strategy
Before investing in any opportunity, DLM Capital advised prospective investors to have the required information about the exit strategy of such investment.
“All investment decisions should be done weighing in counsel from a certified financial advisor. The next time you plan to invest your money, consult experts to avoid getting burnt.”
