The Securities and Exchange Commission (SEC) has issued a renewed warning against the rising threat of Ponzi schemes, citing their damaging effects on investor confidence, financial stability, and the integrity of Nigeria’s capital market.
This caution was delivered by Dr. Sa’ad Abdulsalam, Head of the SEC's Enforcement Department, during a presentation titled “Ponzi Schemes: Avoiding the Pitfalls of Illegality” at a Capital Market Enlightenment Programme organized by the Capital Market Correspondents Association of Nigeria (CAMCAN).
Dr. Abdulsalam emphasized that the proliferation of fraudulent investment platforms—often promising unrealistic returns and operating outside regulatory oversight—continues to undermine public trust and discourage participation in legitimate financial markets.
“The erosion of market confidence caused by Ponzi schemes leads to significant volatility and reduced investor engagement,” he said. “The damage is not just financial—it also impacts the credibility of regulatory institutions tasked with safeguarding investor interests.”
Far-reaching Economic and Social Consequences
Beyond the capital market, Abdulsalam warned that Ponzi schemes inflict serious socio-economic harm. Victims often lose life savings or borrowed funds, resulting in severe hardship and increased poverty.
“These losses are not just numbers—they represent broken trust, devastated livelihoods, and fractured communities,” he said.
Nigeria’s history with Ponzi operations is long and troubling, from the infamous Umanah Umanah scheme of the 1990s to Nospecto in the 2000s and the MMM craze of the 2010s. Abdulsalam noted that in 2010 alone, over 400 unregistered fund managers were uncovered, illustrating the widespread nature of the threat.
He attributed the persistence of Ponzi schemes to a mix of factors including low financial literacy, economic hardship, and the unchecked spread of misinformation through digital platforms.
“Ponzi schemes are multiplying at an alarming rate, and our response must evolve just as quickly,” Abdulsalam warned. “The lack of investor education and the economic pressures faced by many Nigerians are making more people vulnerable to these fraudulent operations.”
SEC’s Strategy: Education, Enforcement, and Collaboration
To combat the menace, the SEC has intensified its investor education campaigns and upgraded its enforcement mechanisms. The Commission routinely publishes warnings and maintains a public list of licensed operators on its official website to help investors verify the authenticity of any investment offer.
Educational efforts now extend to schools and are targeted across various demographics through workshops, radio, television, and social media. These initiatives are designed to equip Nigerians with the knowledge to spot and avoid fraudulent schemes.
“When illegal operations are discovered, we act swiftly. We do not hesitate to seal premises involved in unlicensed investment activities,” Abdulsalam said.
In addition to administrative action, the Commission also pursues civil and criminal cases. It works closely with the police and the Office of the Attorney General of the Federation to prosecute offenders, while also leveraging the Investments and Securities Tribunal (IST) for speedy redress.
Abdulsalam underscored that inter-agency collaboration is central to the SEC’s strategy. Through the Financial Services Regulation Coordinating Committee (FSRCC)—which includes the Central Bank of Nigeria (CBN), Corporate Affairs Commission (CAC), Nigeria Deposit Insurance Corporation (NDIC), and other agencies—the SEC is working to ensure a unified regulatory response to financial crimes.
> “Ponzi schemes don’t respect regulatory boundaries. Our enforcement must be equally coordinated across all relevant agencies,” he noted.
A Call for Collective Responsibility
The SEC reiterated that while it remains committed to protecting the investing public, Nigerians must also play an active role in safeguarding their finances.
“Investors must verify information and avoid schemes that promise returns too good to be true,” Abdulsalam urged. “Capital markets can only thrive in an atmosphere of trust and transparency.”
He concluded by calling on all stakeholders—regulators, media, educators, and the public—to work together in fostering financial literacy and vigilance, which are key to insulating Nigeria’s economy from the destructive effects of Ponzi schemes.
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