Nigerian Gamblers Ignore EFCC, Invest Billion in MMM Ponzi Scheme
LAGOS NOVEMBER 19TH (URHOBOTODAY)-Fallen on difficult times amid the country’s first recession in decades, millions of Nigerians have turned to Mavrodi Mondial Moneybox (MMM), a Ponzi scheme with roots in Russia, which promises unreasonably high returns on investments, according to Quartz.
Originally set up in the late 1980s by Sergei Mavrodi, a Russian ex-convict, the scheme has become popular in Nigeria where it has operated for a year.
According to the Nigerian website, MMM is described as a “mutual aid fund where ordinary people help each other.”
Essentially, registered participants pledge and donate money to help other participants who request it and expect them to return the favour at a later date.
As a catch, the scheme promises 30% monthly returns for participants who donate.
Put another way, a participant who donates money is eligible to request for the amount donated plus 30% interest after a month. That request is then fulfilled by another participant.
Lagos-based economist, Tunji Andrews, likens it to a game of musical chairs. “Mr. A lends help to Mr. B, hoping that Mr. C pays him his own help before it crashes,” Andrews tell Quartz. “Now, knowing that it eventually will, every single payout, is paid for by those who get caught in, when the music stops.”
It seems a fairly obvious ruse. The website even states a warning: “There are no guarantees and promises! Neither explicit nor implicit,” it reads.
“And in general, you can lose all your money.” But that hasn’t stopped the 2.4 million Nigerians who are registered from participating.
For much of the past year, Nigeria has been stuck in a rot. Its economy, once regarded as one of the world’s fastest growing, is mired in a recession that shows no signs of abating.
IMF forecasts the economy to contract by -1.7% this year. Inflation has also hit an 11-year high with prices of goods inching up every month.
As a result, times are incredibly difficult for many Nigerians. With investors pulling out and businesses shutting up shop, unemployment is also an urgent problem.
A recent recruitment drive by a government agency helps put Nigeria’s unemployment problem in context.
Advertising for only 500 positions, Nigeria’s federal tax agency received 700,000 applications—2,000 of which were by graduates with first class honours degrees.
Similarly, in February, the Nigerian Police Force received almost a million applications for 10,000 listed positions.
With millions of unemployed people seeking means of livelihood, a scheme which promises high returns has appeared to be a beacon of hope.
The government admits this much. Saheed Fijabi, a federal lawmaker, says MMM is leveraging “the high level of unemployment and poverty to deceive unwary Nigerians.”
The Central Bank of Nigeria (CBN) has also warned Nigerians to be careful about committing money to “fraudsters” promising high returns at a time when “the economy has suffered some decline.”
But such warnings have irked MMM participants who accuse authorities of having ulterior motives.
Ogadi Ngozi, a highly ranked MMM participant based in Delta state, in southern Nigeria, says the authorities only disapprove of MMM because the scheme is costing local banks some customers. “Nobody goes to the banks for loans anymore,” Ogazi tells Quartz.
“Why go there and collect loans at outrageous interest rates when you can help one or two persons in MMM and be smiling with a 30% reward?” Ogazi also insists participants are aware of “participating at their own risk.”
Given the tough economic woes, MMM participants staunchly defend their involvement in the scheme citing the government’s inability so far to make life better for Nigerians.
And that reality is making the scheme even more popular as, at the time of writing, rankings by Alexa, a web traffic data and analytics company, show MMM’s websites are the fifth and 14th most visited in Nigeria, only behind Google’s global and Nigerian sites, YouTube, Yahoo but ahead of Facebook.
Julie, a Lagos-based participant, plans to continue to risk her money despite the government’s warning. “The government can say what they like. If they can’t assist us, they should leave us alone.”
For its part, the Nigerian government has tried to crack down on the scheme. EFCC, Nigeria’s economic and financial crimes watchdog, says it has begun investigations. But it also admits it could be a tough ask as the scheme is “faceless.”
By design, the scheme does not run a ?entral bank account which holds all the money. Instead, participants transfer money to each other directly “without intermediaries“.
The Central Bank has tried to crack down on bank accounts with any cash deposits involving MMM but participants are also finding a way past that.
While the government has not had much luck so far trying to rein in the scheme, Andrews believes it is only a matter of time before, like most similar schemes, MMM dies a natural death.
“In 2007, there was a different set of Ponzi schemes, just as there where a different set in the early 2000s.
They all crashed eventually as MMM will,” Andrews told Quartz. “I think one went on for almost three years before crashing, but eventually they all do.”