By Shile Akinjo, Corporate Finance Analyst, Advisory, DLM Capital Group
Daily, more than half of Nigeria’s population, consume information on get-rich-quick packages and incentives in an economy with skyrocketing inflation. From catch phrases such as “Want to double your money in 2 days” to “Earn 30% on your capital in 60 days” pushed on media – the struggle to get people to engage in investment scams has tripled since the days of MMM in 2016. 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’. Despite consistent warnings from the SEC, EFCC and CBN raising concerns around investment scams; a larger Nigerian population believe these watchdogs are only trying to suspend their share of the ‘national cake’.
Nigeria’s Securities and Exchange Commission (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, widely read publication, Nairametrics, published a news story about Nigerians storming Loom’s office following the sudden crash of the scam outfit. The SEC, had also in the second quarter of 2020, listed 12 investment scams’ outfits including popular MBA Forex and Helping Hands Investment Scheme which fronted as an initiative of the CBN. However, by early 2021, investors in these schemes went to Twitter and the media to express frustrations over unpaid returns. Till date, MBA Forex still claims it will mollify investors who lost when the firm crashed. Evidently, this shows a large segment of Nigeria’s population possess an unhealthy attachment to investment scams.
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. It is also important to note that these scams will continue to spring up and as such seek more clarity on the returns’ claims when approached with an investment portfolio or proposal. 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 as at today is 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.
The next phase 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 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. Thankfully, platforms such as Nairaland, Facebook and Twitter have proven to assist with proof checking these investment opportunities.
Also, before investing in any opportunity, prospective investors should have the required information 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.