One of my colleagues and I decided to chill out at the sports wing of a popular hotel in Asaba, Delta State during the 2021 workers’ day celebration. We were discussing the stock market, real estate, and investment in general when one of his friends joined us. While we were still talking, the guy chipped in that some aggrieved ‘investors’ thronged the residence of the fleeing promoter of one of the Ponzi schemes in town to see what they can recover in lieu of their trapped ‘investments’.

In our world today, money plays a critical role in relationships, quality of life, and our very existence. To be able to eat good food, dress decently, stay in a serene neighborhood, access quality healthcare, travel at will, and enjoy other goodies of life in a sustainable manner, you need plenty of money and constant inflow of it. Therefore, to enjoy life, you must have any of or a combination of regular salary or wages from employment, profit from business(es), dividends from investments, rents from real estate, or interest from savings. For me, the two most important ones are employment and savings, to create your nest eggs. Employment (formal or informal) and savings are the starting points to wealth creation and financial freedom, except you are born into wealth or inherited a huge sum. From salary and savings, you can make investments that will enhance the life you desire for yourself.

Sadly, recent data from the National Bureau of Statistics (NBS) which puts unemployment rate at 33.3%, the highest in the world, and inflation rate at 18.17% indicates that majority of Nigerians are in for more miseries. Meanwhile, the average savings deposit rate for the month of February 2021, as published on the Central Bank of Nigeria’s website, is 1.79%. The cumulative effects of unemployment and inflation hitting the rooftop, and savings rate nose-diving at the time is made manifest in citizens scampering for high yield ‘investment’ options for their money. This they do, not minding the pedigree of such ‘investment’ options and their promoters. This has led to the proliferation of Ponzi schemes and other unscrupulous ‘investment’ companies.

I recently stumbled on an online survey asking people to indicate if they had ever been swindled in the name of investments. The outcome was ridiculously astonishing! Names were popping out from every corner. Further analysis showed that while some of the Ponzi schemes are city-based, others have state or nationwide spread. With the quest for high returns on every naira ‘invested’, the promoters of such Ponzi schemes usually prey on either the ‘investors’ naivety or greed. The outcome, of course, has been tales of woes, lamentations, and anguish. Therefore, this piece is intended to shed some light on what people should look out for before parting with their hard-earned money.

The types of supposed investors

The naïve: The people in this category usually know little or nothing about what investment entails. What they do most of the time is follow-follow. Once they hear Mr. A gets XYZ returns from somewhere, they jump into the bandwagon. No independent research or fact findings. They are the ones that are easily trapped in the web of Ponzi schemes.

The greedy: This set may know that there is danger, but their greed is what drives them. Their target is usually FIFO (first in, first out). Because of their insatiable appetites, some also get trapped in the Ponzi web.

The gamblers: This group know from the outset what they are up against, a game of chance! What drives them is hope. They ‘invest’ money in things that are totally out of their control.

So how are these different from an investment?

• Essentially, investments have an underlying substance or service. Once you can’t find either a real physical matter or a service in the investment proposal, that is the first red flag.
• Offered return on investment: It is the desire of everyone to get maximum returns from their investments. However, if the rate you are being offered is too good to be true, just watch it. You might not get your capital back. Good investments have great returns over time. Not 100% in 45 minutes!

The irony is, some people who should know, including bankers, usually fall for these schemes. Many lost their hard-earned money to MMM and the likes.

What government should do

The Economic and Financial Crimes Commission (EFCC), Securities and Exchange Commission (SEC), and other relevant government agencies should clamp down on promoters of Ponzi and other dubious investment schemes. Most times, these things are not hidden. They have a presence both online and offline. As I was driving through town that day, I saw several billboards advertising investments with ‘guaranteed 40% return on investment’ littering every nook and corner. These things shouldn’t be. Such billboards shouldn’t be allowed to deceive unsuspecting members of the public. Only investment companies with real business(es) and proven track records should be allowed to display such claims.

Also, the National and states orientation agencies should develop a strategy to educate the populace. A number of people lost their life savings and pensions, running into billions of naira cumulatively. This could have been prevented with well-thought-out and continuous orientation.

Finally, I usually recommend two time-tested personal finance books to those who desire to master their personal finances or seek financial freedom. They are The Richest Man in Babylon by George S. Clason and Rich Dad Poor Dad by Robert Kiyosaki. By the time you are done reading these books, you should be able to make better investment decisions.

Chris Emoghene can be reached via emochris12@yahoo.com or @emochris12