TOLUWANI ENIOLA writes on how economic recession drove three million Nigerians to embrace the controversial Mavrodi Mundial Moneybox, which has left them in the lurch after a freeze last week
With a 30 per cent return on investment within 30 days and other perks such as bonuses from referrals, the idea was too promising for Oladejo Ojo, an almost broke small-scale business owner, to turn down.
“Even if you don’t have the money, I will lend you. Trust me, try it and see the results,” Ojo’s friend, Olayemi kept prodding him when he complained of his difficulty in getting capital to start the scheme.
The idea sounded too good to be true but the bank statement his friend showed him assuaged his suspicion and fears.
Unsure of the fallout of his decision, Ojo joined the trending Mavrodi Mundial Moneybox, popular known as MMM, in October 2016. With an initial deposit of N17,000, which he borrowed from his friends, he had made a profit of more than N100,000 in less than two months.
In 30 days, his N17,000 initial deposit yielded N5, 100, the 30 per cent of his capital. He also gained more from referral bonuses from the 10 per cent of the amount the subscribers he enlisted contributed.
“It was a miracle of a sort to the biting recession which seriously affected my business in terms of cost of operations and even sales. I completed the mandatory National Youth Service Corps scheme last year with no job.
“I started a small business at the Federal University of Technology in Akure. The strike on the campus also crippled sales. A close friend of mine asked me to join MMM in order to make ends meet. So far, it has been weeks of testimonies. I enrolled five people in the scheme and settled my debt effortlessly,” he said while narrating his experience with SUNDAY PUNCH.
Just like Ojo, Adedeji, a sales executive in the Ikeja area of Lagos joined the MMM scheme last year when his employers could no longer pay his full salary. Adedeji, who was a victim of the failed wonder banks that plunged many Nigerians into debts in 2005, told SUNDAY PUNCH that he decided to participate in the MMM scheme because of the high profit margins.
He stated, “Ordinarily with my experience with the failed wonder banks, I should be the one advising people not to put in for MMM but with the way it started, it was too nice to shun. Although we knew it was not sustainable, we were driven by the will to survive.
“Owing to the fact that salaries are not paid and the hardship in the country, I decided to invest a little amount of money and gain little, while I planned to withdraw all my capital. I registered with N50,000 to start.”
Adedeji, who has since introduced more than 15 other jobless youths to the scheme, has been able to make close to N500,000 as gains through referral bonuses and the 30 per cent of his initial capital.
The sweet melody however changed for Ojo and Adedeji last week when the founders of MMM announced that the accounts of three million Nigerians had been frozen for one month.
Both men are still in a daze over the announcement as their initial capital and profits are trapped in the scheme.
“When I got the news that our accounts had been frozen on Tuesday, I was traumatised because I was expecting N100,000 as bonuses that day. I am beginning to regret this because I was planning to use the fund to buy materials for my business,” Ojo told SUNDAY PUNCH.
How MMM works
From Lagos to Abuja to Kano and Aba, MMM became the solution to millions of Nigerians struggling to survive the economic recession.
MMM was created in 1989 in Russia by Sergei Mavrodi, Vyacheslav Mavrodi, and Olga Melnikova. It describes itself as “a community of ordinary people, selflessly helping each other, a kind of the global fund of mutual aid.”
The scheme encourages its participants to send ‘help’ (money) to other participants who had provided help previously.
For instance, if one of its participants accepts to provide help of N50,000, the bank account of the person who requested an help of N50,000 or people whose total request equals N50,000 will be sent to such a participant to pay the money into. In the following month, such a helper would get 30 per cent of his initial capital plus bonuses from other referrals.
A statement on its website explains the business thus, “This is the first sprout of something new in modern soulless and ruthless world of greed and hard cash. The goal here is not the money. The goal is to destroy the world’s unjust financial system. Financial apocalypse! Before you join, be sure to be acquainted with our ideology!”
Also on its website, although it claims to have run the scheme successfully in 118 countries, SUNDAY PUNCH gathered that it was banned in China, Zimbabwe and South Africa on the grounds of being fraudulent. In South Africa, our correspondent learnt that accounts of its subscribers were frozen.
Despite its antecedents in other countries, MMM caught on like wildfire in Nigeria. Google’s Communications and Public Affairs Manager for Anglophone West Africa, Mr. Taiwo Kola-Ogunlade, said MMM has been a major trending topic in Nigeria’s cyberspace.
Web traffic data and analytics, Alexa.com showed that the MMM website was rated the 12th most visited website in Nigeria and 3,330 globally.
Renowned economist, Prof. Akpan Ekpo, in an interview with SUNDAY PUNCH, said the scheme was not sustainable because it is a Ponzi scheme.
Ekpo described MMM as a Ponzi scheme because it imitated the investment model of Italian businessman, Charles Ponzi. According to him, MMM is fraudulent because it uses the contributions of new investors to pay the old ones.
“Those who partake in such schemes would reap initially while later, it would fail because it is not sustainable,” he stressed.
Repeated warnings were issued from the Economic and Financial Crimes Commission and the Securities and Exchange Commission that MMM was not feasible and should not be patronised, but many Nigerians did not pay heed.
“The commission hereby notifies the investing public that the operation of this investment scheme has no tangible business model hence it’s a Ponzi scheme, where returns are paid from other people’s invested sum. Also, its operation is not registered by the commission,” SEC stated.
But reacting to the criticisms by the government agencies, the founder of the scheme, Sergei Mavrodi, urged the Federal Government to look at the benefits of the scheme, adding that many Nigerians had benefitted from it.
In a scathing open letter addressed to the Federal Government, Mavrod was quoted as saying, “What are you trying to get? Do you want the MMM system to collapse and millions of people to suffer? Who will support them then if now MMM is their only means of livelihood? Will you? You even don’t pay wages to people? Or might you not care about them? Might you be using a trendy topic to make a good name for yourselves? What will you say to a mother who will have no money to buy food for her child? Will you let her child die for the sake of the higher interests of the economy?
“You say that MMM is a scam. What is the scam here, if all members are warned in advance about all the risks, the possible and impossible ones? They know there are no investments at all. The warning is a red text on a yellow background placed on the most prominent place of the website.”
Recession pushed Nigerians to MMM — Experts
MMM launched its website in Nigeria when the recession began to bite Nigerians hard in November 2015. By the last quarter of 2016, up to three million Nigerians had joined the scheme. There are other get-rich-quick schemes such as Ultimate Cycler, Crowd Rising Paradise, Helping Hands but MMM is the most popular.
Financial experts say if the economy was not in bad shape, less people would have fallen for the Ponzi scheme. From the last quarter of 2015 till date, life has been hard for the average Nigerian.
The Minister of Finance, Mrs. Kemi Adeosun, had declared that Nigeria was in its worst possible time, quoting the Gross Domestic Product figures for the 2016 second quarter issued by the National Bureau of Statistics.
According to the NBS, in the second quarter of 2016, the nation’s GDP declined by -2.06 percent (year-on-year) in real terms.
“This was lower by 1.70 percentage points from the growth rate of 0.36 percent recorded in the preceding quarter, and also lower by 4.41 percentage points from the growth rate of 2.35 percent recorded in the corresponding quarter of 2015,” the NBS had stated.
Similarly, recent data published by the bureau also showed that the economic recession had led to 1.5 million job losses. In the 2016 report on underemployment and unemployment in Nigeria, the NBS stated that the country’s unemployment rate rose from 10.4 per cent in the last quarter of 2015 to 12.1 per cent.
Also, at the parallel market, the prolonged scarcity of foreign exchange also forced the naira to an all-time-low of 420 against the United States dollar.
Manufacturing firms, industries and banks are some of the worst hit. Earlier in the year, many banks and industries sacked thousands of workers in a bid to contain the recession. With a dip in revenue occasioned by the falling oil prices, many states of the country also cannot pay workers’ backlog of salaries. The effects of this have been damning for families.
To compound Nigerians’ woes, food prices have also increased, making them beyond the reach of the poor. A market survey conducted by our correspondent showed that the prices of some food items have increased by over 100 per cent since the inception of the President Muhammadu Buhari administration.
Traders and consumers of staple food items such as rice, beans, garri, palm oil, vegetable oil, flour, wheat, spaghetti etc. are lamenting the soaring food prices which are taking its toll on their businesses and homes.
The arrival of MMM became an elixir of a sort for millions of Nigerians who were already pushed to the wall.
A MMM subscriber, Bayo Salako, in an interview with SUNDAY PUNCH said he considered MMM as a substitute for lack of job.
“For personal and security reasons, I can’t disclose how much I have earned, but I can honestly tell you that by the grace of God and with the help of MMM, I’ve been able to upgrade my life from my initial status to my current level,” he said.
Similarly, Ekiti-State based civil servant, Fajewonyomi Akinwunmi, said he took to MMM to cushion the effect of unpaid salaries.
Akinwunmi was invited by a friend to join MMM and in no time, he had introduced 10 people to the scheme. This, according to him, has transmuted to thousands of naira for him monthly.
He said, “I initially thought it was one of these fake schemes but after some months, I decided to register and give a try. The first ‘help’ I provided was a boom and ever since then, it has been from one testimony to the other. It has really changed my life and boosted my finances. It took me out of the rat race of recession.”
Amidst the challenges of skyrocketing inflation, rising unemployment, unpaid salaries and mass retrenchment that have been the hallmark of the economic recession, many Nigerians have made millions of naira as profits.
Sharing his success story from the scheme, Bamidele Michael said he joined MMM after several persuasions from friends and acquaintances.
“Being a sceptical person, I observed how they operated and how people get paid. I finally joined in October after being personally convinced. I invested N300,000 and got extra N95,000 as gain,” he told SUNDAY PUNCH.
Although majority of those who invested in the scheme are low and middle-income earners, many rich Nigerians joined the fray. The story of Jane shared on the MMM website showed that the rich have not been left out of the scheme.
Jane’s testimonial partly read, “My name is Jane. I reside in Lagos, Nigeria. On the 1st of November 2016 and 3rd November 2016, I did pledge to provide help of 3,200,000 on both days and on the 29th of December 2016, I requested to get a help of 10,238,000, an accumulation of my 30 per cent mavro and some referral bonuses. In less than 48 hours, all funds were paid into my account. MMM Nigeria is real and really pays.”
An economist, Johnson Chukwu, blamed the recession for the rush for Ponzi schemes in the country.
Chukwu said since millions of naira of savings might be trapped in the scheme, the effects will be on the micro level.
He said, “Owing to the recession, a lot of people are facing hard times. If you close the windows to legitimate businesses, people will look for anything that will keep them alive. The MMM came at a point when people were desperate to survive. The returns on investment are way outside this world. It became too attractive for people who had no opportunities for gainful engagements.”
Banker and financial analyst, Kunle Ezun, said although the banks would not lose much because they didn’t lend to the MMM subscribers, the failure of the scheme would be felt.
Ezun maintained that since over three million Nigerians enrolled for the scheme, it had become an income line for the banks because they served as the platform for the transfer of funds.
He said, “You can’t rule out the fact that there will be an impact on the banks. Banks provided the platforms for funds transfer. If we put that into context, it means whatever transactions that were done by the MMM subscribers, there was a level of income that accrued to the banks. If every bank took N100 on every transfer, that’s a lot.”
The Director-General of the West African Institute for Financial and Economic Management, Prof. Akpan Ekpo, stressed that millions of Nigerians would not have patronised MMM if the country’s economy was stable.
The economist stated that since many of the MMM subscribers were from the informal sector, the loss of their savings would affect the sector.
He said, “The government should work more than last year. It needs to spend more on capital projects and get us out of the recession. The government should find ways to create opportunities for employment and provide temporary relief for the jobless. Recession drives the scheme.
“People are wrongly saying the government should not spend more on recurrent expenditure. But when you are in a recession, where workers are owed salaries, the Federal Government must ensure that it gives money immediately to the state governments or directly to those who are being owed so that demands for goods and services will increase. When in a recession, you have to spend both recurrent and capital expenditure. Otherwise, people will patronise fraudulent schemes and when they lose money for a long time, crime will increase.”
Tale of regrets, debts
The sudden news that the Ponzi scheme had frozen the accounts of its participants for one month on Tuesday threw the country into panic.
A statement by the promoters of the scheme cited “heavy workload on system” as the reason for the ban.
A day after freezing the accounts of its subscribers in Nigeria, the MMM scheme launched its website in Kenya, promising 40 per cent return on investment in 30 days, 10 per cent higher than what it gave its Nigerian subscribers.
With the freezing of the accounts, participants who were supposed to withdraw their profits and 30 per cent interest cannot do so until January 2017, further confirming the fears that the scheme had crashed.
This will be a bleak Christmas for millions of its subscribers who were expecting to get “help” in December from the scheme.
Bola Adeyinka, a job seeker told SUNDAY PUNCH that when she heard the news, she lost appetite for food. Adeyinka invested N200,000 which she partly borrowed from her sister.
“I put all my savings into the scheme. I was expecting N300,000 today. My target was to reap N500,000. If I can get my N200,000 back, I won’t do it again. I pray that they lift the suspension in January,” she told SUNDAY PUNCH.
Also on Tuesday, while Ojo was expecting to be paid over N100,000 as bonuses, Adedeji was expecting N57,000 as bonus. These are apart from their initial capital.
If the scheme crashes, they would have lost thousands of naira. People like Jane who invested millions of naira are the worst hit. Some of them took to the social media to express their despair as the reality of losing their investments dawned on them.
Akinwunmi, another subscriber, said, “Waking up this morning to read from my private office (that it had been suspended until January) was shocking.”
Although the promoters of the scheme had tried to pacify its subscribers not to panic, the red signal is evident based on the fact that the scheme crashed after a temporary suspension in South Africa.
An online medium, DailyPost, had reported that a Benue State indigene, identified simply as Adakole, tried to commit suicide by ingesting insecticide when he learnt that MMM had frozen his account.
Adakole reportedly invested N300,000 meant for his wedding in the scheme. Checks by our correspondent showed that many people committed suicide when the scheme crashed in Russia.
To forestall similar occurrences, the Lagos State Emergency Management Agency, on its Twitter handle, asked Lagosians to quickly dial the toll-free number 112 to report any case of attempted suicide.