MMM: As the bubble bursts
WE are today taking a short excursion into Criminology. Confidence Game (con-game for short) depicts a crime situation where the person who should have reported the crime is part of it. For example, if you were to patronise a prostitute in a jurisdiction where prostitution was outlawed; and in the course of an argument, she stabbed you with a kitchen knife; you were on your own for, if you reported to the police, you would first have to explain what you were doing in a whore house. That is the exact nature of many aspects of life, particularly gambling.
The Nigeria Deposit Insurance Corporation, NDIC, has just reported that three million Nigerians lost N18 billion to MMM, an acronym for Mavrodi Mondial Movement/Moneybox. It was founded in 1989 by a Russian, Sergey Mavrodi with his two brothers – Vyachestav Mavrodi and Olga Malnikovian.
The scheme, which operates in Nigeria; and some other African, Asian and South American countries, provides financial assistance of up to 30% of invested sum to its members. The entry on its website indicates that it does this through a shared “community of people providing each other financial help on the principles of gratuitousness, reciprocity and benevolence”. The promoters provide a “technical platform, which helps millions of participants worldwide to connect those who need help with those who are ready to provide help for free”.
For too long, Nigeria has been home to these quick-fix business ventures. Barely three decades ago, there was the NOSPETCO Oil and Gas Company, which turned out to be a “wonder bank” that offered interest rates of over 100% on investment at a time when regular commercial banks were offering less than 6% interest rates to their customers.
In 1991, another “wonder bank” called Resource Managers Nigeria Limited, which offered 60% interest, compounded monthly, on deposits, was exposed as a fraud. The founder, Umanah E. Umanah, was arrested and found guilty by a Military Tribunal – for operating a bank without license.
After the Umanah saga, there was seemingly an outbreak of phony financial houses, including Planwell Watershed, Arise and Shine Trust Company, Forum Business Finance, etc, that offered mouth-watering interest rates on deposits. They were exposed as rip-offs after Nigerians had been fleeced of their hard-earned money.
In essence, what will kill a dog does not smell to it. Given our past experience, one would expect that by now, the ponzi schemes should not thrive anywhere in Nigeria.
All the same, it must be acknowledged that MMM’s approach was different and most alluring. It came with a promise to rearrange the disproportionate distribution of wealth in society. To the sponsors, a situation where a vast majority of the people was down-trodden while a microscopic minority wallowed in opulence was unacceptable and must be eradicated.
With such a catchment phrase, the MMM made a big debut in Nigeria in January 2016, with beneficiaries from different parts of the country proclaiming its goodness. The good news spread across the nation like wild fire in the harmattan. To most participants, the scheme was extremely profitable while it lasted. People sold their landed property and vehicles to invest in the venture. That was how in less than one year, the scheme could boast of well over three million members.
Going by the lessons of history, the question was not whether the pyramid would collapse but when. Government was concerned about what would be the fate of participants in the event of a collapse. At a point, the Central Bank of Nigeria, CBN, and the Securities and Exchange Commission, SEC, issued stern warnings to Nigerians about the dire consequences that awaited investors in the end.
On their part, Nigerians literally asked government to shut up and cover its face in shame because, after all, MMM was stepping in where government had failed to provide gainful employment and basic means of livelihood to its citizens. There was a choice between life and death; and they had to grab the life that MMM presented.
The “Catch 55” situation was that MMM was not registered in Nigeria. It operated online and it was difficult for government to have a hold on it.
Why would people be plunging into a business that they knew was highly risky? For one thing, compulsive gambling is greed-driven. For another, in a depressed economy, the consideration would be that whether they took the plunge or not, hard times were already here. So why not take the plunge and possibly make some money that could change their situation?
Again, it was difficult not to be involved. We sympathise with that husband who might initially not want to be involved. In these hard times, how does he explain to his wife that he cannot afford a pot of soup when his friend who was similarly situated with him a few months ago now drives a Prado Jeep from the proceeds of his investment in the pronzi scheme?
Government is in the good business of protecting the weak from the strong, hence we join in sympathising with the ultimate losers. There is perhaps no better time than now to warn of the dangers inherent in compulsive gambling.
Naturally, people are wont to see the debit side, hence they jump to such conclusion as “Nigerians have lost N18 billion to MMM” whereas, as much as one cannot be seen to be openly encouraging gambling, the truth remains that somewhere along the line, some invisible hands – particularly the early investors – might have quietly gained double the loss from the scheme. And, it is unusual for anyone to appeal on a case he has won.
Apparently, Nigeria has lost the moral courage to deal decisively with the ponzi schemes when government itself is essentially a ponzi scheme – the more it promises, the less it delivers!
We are under no illusion that we have seen the last of these ponzi schemes. We hear some are already springing up. Government must earnestly begin the process of re-inventing itself. Meanwhile, our caveat is simple: let the investor beware!