“I want to introduce you to one of the biggest investment platforms in Nigeria, RackSterli,” the pop star Davido told his millions of fans in a video last December.
“If you invest with RackSterli, you’ll get paid within 12 to 24 hours, instant payment,” he continued. “It has built many millionaires.”
Damilare Jamiu, a painter in his 20s, was looking for extra income to launch a dry cleaning business. Last December, he came across RackSterli, and although he was sceptical, Davido’s full-throated backing and RackSterli’s claim that it had a physical office in Lagos convinced him. The scheme seemed straightforward: it invested its clients’ cash in cryptocurrency and real estate and promised a 40% monthly return on investment (ROI).
Jamiu did not become a millionaire. Instead, he was burned to the tune of 560 000 Naira (about $1 365) as RackSterli went up in flames in March. He had been looking forward to a payout of $2 073.
‘’I was expecting it to crash but I was not expecting it to go finally … like they would have some issues and come back,’’ Jamiu told The Continent.
It has been four months and the comeback has yet to happen. The office in Lagos does not exist; it’s unclear if it ever did.
‘’I heard an office and I thought if there was an issue, I could just go there,’’ he said.
Jamiu is one of many Nigerians who have lost money to suspected Ponzi schemes. Ponzi schemes are scams that promise enormous returns within a short period, paying existing investors with money from new users. They collapse as numbers grow and the originators bolt with their investors’ money.
Ponzi schemes are not new: they first surfaced in Nigeria in the 1980s, a decade marked by the poor economic leadership of the country’s military dictators. The earliest recorded schemes were the Umama Umama scheme in Calabar in the 1980s and Planwell in Edo state in the early 90s. The landscape has changed considerably thanks to the internet. Despite repeated losses, Nigerian youth still patronise the schemes in droves.
In 2016, three-million Nigerians lost 18-billion naira ($44-million) when MMM – a popular Russian enterprise promising 30% ROI – crashed, according to Nigeria’s Securities and Exchange Commission.
Nigeria’s worsening unemployment problem and widespread poverty are partly to blame for making Ponzi schemes fashionable. Nigeria’s unemployment figure stood at 33% in the last quarter of 2020, according to the National Bureau of Statistics. Many more are underemployed.
Kalu Aja, a finance expert, told The Continent that the recent success of bitcoin and the stock market has made people embrace risky ventures in return for astronomical rewards. “Investors believe high returns are still possible, but simply risky. They do not believe it is impossible to make 25% [return] a month, they [only] believe it carries a higher amount of risk.’’
When MyBonus2u, an alleged Ponzi scheme that surfaced online last October, crashed earlier this year, hundreds of Nigerians were left high and dry. Uche Azeh, 26, was one of the unfortunates; the university student lost 500 000 naira.
The scheme was promoted as an e-commerce platform with a 3-5% daily ROI after users made 60 orders. The wannabe investors believed they were helping products from well-known e-commerce companies such as Alibaba, Jumia, Amazon and others gain market prominence in Nigeria. MyBonus2u’s chief executive, Omotola Adanna, had degrees from Stanford and Harvard and was named one of africa.com’s top 50 entrepreneurs.
Every single detail, including Adanna’s profile, turned out to be false. The name was a nom de guerre and the mastermind behind the scheme is unknown; MyBonus2u’s social media accounts have been silent since January.
“They were really convincing. If you Google them, you would see they are somehow linked to many high-profile organisations such as Amazon,’’ Uche told The Continent. ‘’I don’t know how they were able to pull that off.”
Uche was well aware of the risks involved in investing in a questionable venture such as MyBonus2u. But he believed that he would be able to reap his rewards before the whole thing came tumbling down.
Like so many Nigerian youth before him, he was wrong.
This story first appeared in The Continent, the award-winning pan-African weekly newspaper designed to be read and shared on WhatsApp. To subscribe, send a WhatsApp/Signal message to +27 73 805 6068.