Despite repeated warnings from financial regulators and industry experts, Ponzi schemes continue to thrive in Nigeria.
Experts say the failure to learn from previous scams, combined with the inability or unwillingness of relevant authorities to proactively identify and clamp down on these entities, created the fertile ground upon which CBEX flourished.
Allure of quick returns
According to Vice Chairman of Highcap Securities, David Adonri, the key driver behind the persistent attraction to Ponzi schemes is greed, deeply rooted in a get-rich-quick mentality.
“A lot of Nigerians want to reap where they did not sow,” he said. “They are lured in easily with mouth-watering promises… When you set a bait for a rat, the rat is usually attracted by the bait. And in the process of grabbing the bait, the rat is grabbed.”
Adonri emphasised that while fraud exists globally, the frequency in Nigeria is exacerbated by widespread financial illiteracy and unrealistic expectations.
The ability of CBEX to operate for nine months and defraud investors on such a massive scale points to clear lapses in regulatory enforcement. Adonri attributes this to institutional fragility. “Nigeria has weak and compromised institutions. Agencies like the SEC and CBN don’t have secret police like DSS or CID that can sniff out fraud proactively. And even when they have information, they often don’t share it with sister agencies.”
He expressed deep concern over the lack of coordinated intelligence-sharing, saying, “EFCC might have information but won’t share it with the police. By the time action is taken, the scheme has already folded up and the operators are gone.” Adonri stressed that while the recently enacted Investment and Securities Act (ISA) 2025 provides tougher penalties including 10-year jail terms for Ponzi operators, it is only effective when properly enforced. “The law is there now, yes. But the institutions need capacity and integrity to wield it.”
SEC’s defence
Reacting to criticisms of regulatory laxity, the Director General of the Securities and Exchange Commission (SEC), Emomotimi Agama, insisted that the Commission had not been asleep. “We have carried out several public enlightenment programmes on the dangers of investing in unregistered schemes.
“From billboards to podcasts and active helplines, we have created multiple touchpoints for investor engagement.”
Agama also acknowledged the pain of affected CBEX investors and the difficulty of detecting unregistered entities like CBEX, but insisted the SEC’s hands are often tied until complaints are received.
“We cannot force people to make the right investment decisions. We can only enlighten, and we will continue to do so.” Responding to a proposed N10 billion investor education fund by the Senate, Agama promised renewed strategy. “It’s not that previous efforts were ineffective. Some people are simply adamant. But we will re-strategize and use the right channels to reach more Nigerians.”
Red flags ignored
The Managing Director of Arthur Stevens Asset Management, (ASAM), Olatunde Amolegbe, offered a more structured analysis, linking the CBEX debacle to psychological and informational gaps.
“The quest to get rich quickly makes people ignore red flags. The informational aspect involves not doing due diligence before parting with money,” he said.
He stressed that a simple check on the CBN or SEC websites could prevent many losses.
“If the platform or product is not regulated or registered, then it’s already a red flag. But people still invest.”
No pity for the greedy
From the shareholder community, Bisi Bakare of the Pragmatic Shareholders Association of Nigeria (PSAN) was frank and dismissive of the victims. “They are all armed robbers.
“Both the perpetrators and those who introduced others into it”, she said.
Bakare blamed Nigerians’ obsession with quick returns for the persistent popularity of Ponzi schemes.
“How can you give someone N500,000 and he promises N1.5 million in a week? What kind of business yields that?” she queried.
She noted that despite government and regulatory warnings, even dating back to the days of MMM, many still fall for these traps.
They described the victims as instruments to fraud.
“The government also needs to apply some punishment on the victims themselves for aiding and abetting the perpetration of fraud in Nigeria’s financial system.” They argue that cases such as CBEX continue to undermine the appeal of Nigeria’s investment ecosystem to foreign investors.
T-bills, Commercial Papers as legitimate short-term investment alternatives
In order to divert investors’ minds from ponzis, experts also recommend promoting regulated investment options that offer reasonable short-term returns in the money market, such as treasury bills and commercial papers, which yield 15-20 per cent annually. These instruments, while less lucrative than Ponzi schemes’ promises, are secure and regulated, offering protection through mechanisms like the Investor Protection Fund.
