When the popular Ponzi scheme, MMM crashed in Nigeria few years ago, the Nigerian Deposit Insurance Corporation, NDIC, estimated that three million Nigerians who were participants in the scheme suffered a huge financial loss to the tune of 18billion naira. Some were said to have either committed suicide or contemplated it. After the crash of MMM, I concluded that no Ponzi scheme will ever thrive in Nigeria again because we have learnt our lessons and we know better. I was very wrong. Apparently, the greatest and only lesson people gleaned from their loss in the MMM Ponzi is “cash in early and cash out early”.
There’s a new guy in town and I only learnt of it last week. A week earlier, I received a WhatsApp broadcast message from a relative which read “XYZ (relative’s name) Loom 1000 to get 8000. Follow this link to join my WhatsApp group:” I glossed over the invite and completely ignored it because it didn’t make sense to me. 800% return on investment in less than 24 hours? It’s ridiculous and obviously Ponzi. It wasn’t long before I discovered on social media that actually there’s a new guy in town known as Loom Money Nigeria. I also discovered that many Nigerians, some of whom I know have already embraced the scheme with both arms. Everyone targeting to cash in early and cash out early. Everyone acknowledging the scheme will collapse but they will make sure they won’t be on the losing side.
My dear friend, let’s not kid ourselves, what is bad is bad and Ponzi is bad. Wikipedia defines Ponzi scheme as a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. The scheme leads victims to believe that profits are coming from product sales or other means, and they remain unaware that other investors are the source of funds. It is a form of fraud, there’s nothing good about it. I know there’s poverty in the land, our country Nigeria is the poverty capital of the world but there are legitimate ways to invest money that will guarantee returns, peace of mind and a clear conscience. Someone will read the last line and ask in Nigerian parlance, “Who clear conscience epp (help)?” My answer: everyone. As Eraldo Banovac said “Wealth and power aren’t the most important things in life. What is truly important is to have a clear conscience.”
How will you sleep at night knowing that you invited family and friends to a scheme that is bound to fail just so that you can make your own money? In an actual business, all parties gain and if there are losses, all parties share in the loss. In a Ponzi, somebody must be the mugua, someone must be on the losing side. Every new comer in a Ponzi scheme is a potential loser and there’s no way of knowing when the crash will occur. At the time MMM Nigeria Ponzi crashed in December 2016, the ‘experts’ in the scheme had projected that it will take another year or two for it to crash. They were terribly wrong.
Lastly, here are a few questions you can ask to help you tell whether an investment opportunity is genuine or not:
How does the business make money?
In other words, what’s the business selling? What’s the product? What service is being rendered? Businesses don’t conjure up money and they don’t rob Peter to pay Paul. A genuine business or investment opportunity has a product or service that people pay for.
Is there an urgency about the business?
You hear things thing like invest now or nothing. This is a red flag. It’s your money, before you part with it, do your due diligence no matter how long it takes you. I’m not suggesting you engage in analysis that leads to paralysis but please take your time. If you lose your money, wetin you gain?b (That’s on a lighter note)
Is it complicated?
If you can’t explain in clear terms what the business is all about, that’s a red flag. Can you explain the business to your grandmother for her to understand without having headache?
In all, please be cautious. Quick gain does not pay. The wisest king that ever lived said it this way “Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows over time”c. If you are looking for good investments that will grow over time, read my article Good News! Bad News!
a – mugu is a Nigerian Pidgin term which means fool.
b – A line from a Nigerian song by Victor AD
c – Proverbs 13:11