Why do Nigerians keep falling for Ponzi schemes?
Ever since the notoriously widespread success and eventual crash of MMM Ponzi scheme in 2015, Nigerians have been trying to replicate its popularity.
MMM was simple, you put a certain amount in the scheme and after two weeks, you get your money back plus 30% interest on your “investment”.
Except your are not actually investing in anything. MMM doesn’t sell any products or services. The scheme survived for the short period of time it did by using the investments of new entrants to pay older ones, and of course, the scheme runners were siphoning their share off the top.
MMM eventually crashed in December of 2015, leaving millions of Nigerians in agony. Several people had taken a loan with the plan to pay back in two weeks, while others even used their employer’s money to “invest”.
In the end, the Ponzi runners were estimated to have made over $1billion from the scheme.
Today, seven years since the crash of MMM, the new Ponzi scheme Nigerians are into is called reverse betting.
Unlike regular betting where punters place wagers on the outcomes of certain games. With reverse betting, punters are given an outcome – usually the final score of a soccer match – and asked to bet that the outcome will not be true.
For example, a punter might bet that the match between Arsenal and Spurs will not end in a 4-0 victory for Arsenal, they win as long as the final result is not a 4-0 victory for Arsenal.
And what’s even crazier is that some website offer a cashback even when the outcome is true! Are you wondering, then how do these websites make money?
If you are thinking all these sounds way too good to be true, well that is because it is way too good to be true. The first website that pioneered reverse betting in Nigeria has already crashed after a few weeks trapping thousands of customer’s funds in it.
Greed and bad economy
The main reason why most Nigerians keep falling for Ponzi schemes is just pure greed. One victim of the crashed reverse betting website, 86fb.com reached out to me and told them how he lost over N500k on the website.
Someone who had N500k and couldn’t think of anything legitimate to do with it, but chooses to put it into a money doubling scheme? He actually knew that the website was a Ponzi that would eventually crash but had hoped to cash out his money before the crash.
Another reason is the country’s bad economy. Nigeria is a poor third world country with third world problems.
First, starting a business here is a challenge, there’s no stable electricity supply, water and security. These are the basic things that guarantee the take off of most businesses.
In addition to these, the country’s legal structures are unreliable for conflict resolution. Then there’s government corruption and poor structures of taxation.
Stocks of publicly traded companies, even those listed on the Nigerian Stock Exchange is not exactly a good investment as most of them don’t even bother to pay dividends due to poor regulation.
All these and more is why most Nigerians resort to Ponzi schemes and money doubling schemes as a means of “investment”. At least in the short term they can make a profit on their money if they are lucky, and if they are not, well..
Ponzi schemes will continue to have a market in Nigeria as long as Nigerians continue to believe they can make quick bucks before the next one crashes and the government refuses to look at factors that contribute to ease of doing business.
Electricity, water, security, infrastructure and legal certainty, all these things are not just luxuries, they are what the country needs if it means business.