Why Many Nigerians fall for ponzi schemes: what the Govt and SEC must do

In recent years, Nigeria has witnessed a troubling rise in the number of citizens falling victim to Ponzi schemes.

Despite repeated warnings and ponzi collapses like MMM and others, many still find themselves entrapped by fraudulent investment platforms promising unrealistic returns.

The question is, why? And what can the government and the Securities and Exchange Commission (SEC) do to curb this dangerous trend?

Why do Nigerians fall for Ponzi Schemes?

Economic Hardship: With high unemployment, inflation, and a struggling economy, many Nigerians are desperately seeking alternative means of survival. Ponzi schemes like CBEX exploit this desperation by offering quick and massive returns on minimal investments. Reports showed that some people usually invested with the hope of doubling it for feeding, house rents etc.

Low Financial Literacy: A significant number of people, especially in rural areas, lack basic financial education. They often do not understand how legitimate investments work and are unable to distinguish between regulated investment opportunities and fraudulent ones.

Peer Pressure and Testimonials: When friends or family members claim they have made money through a scheme, others tend to join out of trust and the fear of missing out (FOMO). Early beneficiaries often unknowingly become promoters of the scam. For Instance, Adunni who spoke to FIJ on the issue said that before she invested her N470,000 with CBEX, two of her friends had repeatedly told her about it. “She didn’t join them until one of her friends ‘cashed out’ $1,000 in profit. That got her hooked.”

Weak Regulation and Slow Justice: Sometimes, even when complaints are made, regulatory response is slow, and justice is delayed. Many fraudsters exploit this loophole, knowing they can operate for a while before getting caught if at all.

Lack of Trust in Traditional Institutions: Distrust in banks and government structures makes alternative, often unregulated options more appealing to the public. Some believe the “system” is already failing them, so they turn to riskier methods.

Read Also:

CBEX Collapse: What You Should Know About Nigeria’s Latest Ponzi Scheme Disaster

What Should the Government and SEC Do?

The SEC issued its warning only after CBEX had already collapsed, so there is need for the government to act beyond just warnings.

Strengthen Public Awareness and Education: The SEC and government should invest heavily in public education campaigns. People must be taught the signs of a Ponzi scheme, the importance of regulated investments, and the long-term danger of “get-rich-quick” platforms.

Enforce the Investments and Securities Act: Strictly Under the Investments and Securities Act (ISA) 2007, especially Sections 13(w) and 303, the SEC has the power to investigate and prosecute illegal operators. This authority should be used more aggressively to serve as a deterrent to others.

Swift and Public Justice: Regulatory agencies should collaborate with law enforcement to swiftly prosecute those behind Ponzi schemes. Court cases and convictions should be made public to discourage others from engaging in such activities.

Encourage Legitimate Alternatives: Government should create and support micro-investment opportunities for low-income citizens through licensed platforms. Making legitimate options accessible can reduce the appeal of fraudulent ones.

Collaborate with Tech Platforms: Many Ponzi schemes thrive through social media and messaging apps. The government should partner with these platforms to flag and shut down fraudulent investment pages and links.

The government, particularly the Securities and Exchange Commission (SEC), must move beyond reactionary press releases and begin proactive regulation and digital monitoring. There is an urgent need for robust public education campaigns, stricter penalties for perpetrators, and technology-driven tracking of emerging fraud schemes across social media and online platforms

Until both citizens and institutions become more vigilant, Nigeria will remain a prime target for financial predators. The time for serious action is now.