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The Securities and Exchange Commission (SEC) has once again voiced serious concerns regarding the persistent enthusiasm among Nigerians for investing in Ponzi schemes, despite the wide availability of safer and regulated investment products.
This worrying trend highlights the challenge of investor education and the allure of unrealistic returns that fraudulent schemes often promise.
Dr. Sa’ad Abdulsalam, Head of the Enforcement Department at the SEC, shared these observations during the Capital Market Enlightenment Programme held on Thursday.
“The event was organized specifically for members of the Capital Market Correspondents Association of Nigeria at the SEC’s Lagos office. It aimed to deepen understanding and awareness of the risks involved in unregulated investment opportunities and promote safer investment practices.
Highlighting the gravity of the issue, the SEC pointed out that approximately three million Nigerians lost a staggering N18 billion when the widely known Ponzi scheme, Mavrodi Mundial Movement (MMM), collapsed in 2016.
“Moreover, data from a report by Norrenberger Financial Investments revealed that Nigerians had lost over N300 billion to various Ponzi schemes in the five years leading up to 2022.
“These figures underline the magnitude of financial damage caused by fraudulent schemes and the urgent need for enhanced public vigilance.
Dr. Abdulsalam emphasized the importance of increased public awareness and due diligence in making investment decisions. He noted that despite the existence of numerous legitimate and regulated investment vehicles approved and monitored by the SEC, many Nigerians continue to fall prey to fraudulent schemes. This is largely driven by the lure of unrealistic, high returns that Ponzi schemes typically advertise.
“There are many credible products for people to invest in,” Abdulsalam explained. “If you want a safe environment to invest in, you can invest in mutual funds. But most people are looking for very high returns.
“That is why I see people patronizing the Ponzi schemes.” His remarks shed light on the critical gap between investor expectations and the realistic returns offered by regulated products.
The SEC’s role in maintaining market integrity involves registering fund management companies that develop investment products. These products undergo stringent regulatory vetting before being made available to the public, ensuring transparency and protection for investors.
Abdulsalam also highlighted the availability of non-interest funds for investors seeking Sharia-compliant options, stating, “There are non-interest funds, Islamic mutual funds. They are there, and there are many. Just go to the internet; you will find them, you will see them, and you will see who is promoting those products.”
In his advisory to potential investors, Abdulsalam urged everyone to verify the legitimacy of investment offerings and the credentials of promoters through the SEC. “Check and confirm: is the person a registered operator? And if you want to confirm, send us an email. We will tell you the status,” he said, encouraging a cautious approach to investing.
The SEC official further warned that the rampant proliferation of fraudulent investment schemes continues to erode public trust in formal investment platforms. He explained, “The erosion of market confidence caused by Ponzi schemes leads to significant volatility and reduced investor engagement. The fallout not only damages individual finances but also tarnishes the reputation of regulatory institutions tasked with protecting investor interests.”
Beyond the financial market implications, Dr. Abdulsalam drew attention to the broader social and economic consequences of Ponzi schemes. He noted that the losses suffered by households—often involving life savings or borrowed funds—intensify socio-economic hardships and threaten community cohesion.
“These losses are not just figures on a balance sheet,” he remarked. “They represent broken trust, devastated livelihoods, and increased poverty in affected communities.”
Another important issue raised during the program was the misuse of certificates issued by the Special Control Unit Against Money Laundering (SCUML). Abdulsalam cautioned the public against being misled by some operators who display these certificates to falsely imply business legitimacy.
He clarified that the SCUML certificate, which bears the logo of the Economic and Financial Crimes Commission (EFCC), is solely intended to demonstrate compliance with anti-money laundering regulations and is not a business license.
“Because the certificate carries EFCC on top, most believe they can use it to give a coloration of legitimacy to their business. EFCC does not know about them. SCUML is just a unit,” Abdulsalam explained, adding that some fraudulent businesses even go as far as framing the certificate and displaying it in their offices to deceive clients.
To address this concern, the SEC is currently in discussions with the EFCC to reconsider the format of the SCUML certificate. Dr. Abdulsalam suggested implementing a more secure verification system, such as digital codes or unique verification numbers, to prevent its misuse and protect unsuspecting investors.
In conclusion, the Securities and Exchange Commission reaffirmed its unwavering commitment to protecting investors and maintaining the integrity of Nigeria’s capital market.
The Commission urged the public to remain vigilant and to always confirm the authenticity of any investment product before committing their funds. Enhanced investor education, verification of operators, and cautious investment practices remain essential tools in combating the scourge of Ponzi schemes and safeguarding the financial well-being of Nigerians.