The Securities and Exchange Commission (SEC) has expressed concerns over Nigerians’ ongoing attraction to Ponzi schemes, despite the availability of safer, regulated investment alternatives.
Speaking at the Capital Market Enlightenment Programme organized for the Capital Market Correspondents Association of Nigeria in Lagos on Thursday, Dr. Sa’ad Abdulsalam, Head of the SEC’s Enforcement Department, highlighted the devastating financial and social toll of these fraudulent schemes.
The SEC revealed staggering figures underscoring the scale of the problem. In 2016, the collapse of the infamous Mavrodi Mundial Movement (MMM) Ponzi scheme left approximately three million Nigerians with losses totaling N18 billion.
A 2022 report by Norrenberger Financial Investments further estimated that Nigerians lost over N300 billion to various Ponzi schemes between 2017 and 2022. These figures reflect a troubling trend of investors chasing unrealistic returns, often at the expense of their life savings.
Abdulsalam attributed this pattern to a lack of due diligence and an appetite for high-yield promises that legitimate investment vehicles rarely match. “There are many credible products for people to invest in,” he said. “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 Ponzi schemes.”
The SEC official emphasized that the commission continues to register fund management companies that develop vetted investment products, including mutual funds and non-interest funds such as Islamic mutual funds. “They are there, and there are many,” Abdulsalam noted. “Just go to the internet; you will find them, you will see them, and you will see who is promoting those products.”
To protect investors, Abdulsalam urged the public to verify the legitimacy of investment offerings and their 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 advised. This call for vigilance comes as the SEC works to rebuild trust in the capital market, which has been eroded by the proliferation of fraudulent schemes.
The consequences of Ponzi schemes extend far beyond financial losses, Abdulsalam warned. “The erosion of market confidence caused by Ponzi schemes leads to significant volatility and reduced investor engagement,” he said. “The fallout not only damages individual finances but also tarnishes the reputation of regulatory institutions tasked with protecting investor interests.”
The social and economic ripple effects are equally severe. Household financial losses, often involving borrowed funds or life savings, exacerbate poverty and strain community cohesion. “These losses are not just figures on a balance sheet,” Abdulsalam stressed. “They represent broken trust, devastated livelihoods, and increased poverty in affected communities.”
Adding to the challenge, Abdulsalam highlighted the misuse of Special Control Unit Against Money Laundering (SCUML) certificates, which some operators falsely present as proof of legitimacy.
Issued by the Economic and Financial Crimes Commission (EFCC) for anti-money laundering compliance, these certificates are not business licenses. “Because the certificate carries EFCC on top, most believe they can use it to give a coloration of legitimacy to their business,” he explained. “EFCC does not know about them. SCUML is just a unit.”
To address this, the SEC is collaborating with the EFCC to reform the SCUML certificate system, potentially introducing digital codes or verification numbers to prevent misuse. Abdulsalam noted that some fraudulent operators prominently display these certificates in their offices to deceive clients, further complicating efforts to combat fraud.
The SEC reiterated its commitment to investor protection, urging Nigerians to exercise caution and verify the authenticity of investment products before committing funds. Abdulsalam’s remarks stress the need for greater public awareness and education to steer investors toward regulated, transparent financial products.
WHAT YOU SHOULD KNOW
The Securities and Exchange Commission of Nigeria is the primary regulatory body responsible for overseeing and regulating the Nigerian capital market. The SEC’s mandate includes protecting investors, ensuring market transparency, and promoting the development of a fair and efficient financial market system. It registers and supervises investment products, such as mutual funds, and works to combat fraudulent schemes like Ponzi schemes to safeguard investor interests.
The SEC urges the public to verify investment legitimacy through the Commission and warns against the misuse of SCUML certificates, which some operators falsely use to appear legitimate. Investors are encouraged to prioritize regulated products and exercise caution to protect their finances and livelihoods.
