The Ponzi pandemic: How schemes like CBEX are undermining Nigeria’s financial system

Lagos, Nigeria – In a dimly lit cybercafé in Lagos’s bustling Yaba district, a young man named Emeka excitedly clicks through his dashboard on CBEX, a cryptocurrency investment platform promising “guaranteed 50 percent monthly returns.” Three months later, the website vanishes overnight—along with Emeka’s life savings. His story is far from unique. Nigeria, Africa’s largest economy, is grappling with an explosion of Ponzi and high-yield investment schemes that are eroding trust in the financial system, diverting capital from productive investments, and exposing regulatory gaps.

The rise of “Get-Rich-Quick” fever

Nigeria’s economic struggles—high inflation (24.23% as of March 2025), stagnant wages, and unemployment—have created fertile ground for fraudulent schemes. Platforms like CBEX, MBA Forex, and Binomo lure desperate Nigerians with promises of unrealistic returns, often exploiting the growing interest in cryptocurrency and forex trading.

Read also: Court orders arrest of six in alleged $1bn CBEX crypto scam

· The scale of the problem: The Securities and Exchange Commission (SEC) estimates that over 5 million Nigerians have lost a combined $500 million to Ponzi schemes since 2020.

· Psychological appeal: With youth unemployment on the rise, many see these schemes as their only escape from poverty. Social media influencers amplify the hype, posting luxury cars and vacations supposedly funded by “smart investments”.

How Ponzi schemes weaken the financial system

1. Capital flight and lost savings

Unlike legitimate investments, Ponzi schemes do not generate real economic value. Instead, they:

· Divert savings away from banks and capital markets, reducing liquidity for businesses.

· Increased financial instability when collapses trigger mass withdrawals from legitimate institutions (as seen during the Mavrodi Mundial Movement (MMM) crisis in 2016).

2. Erosion of trust in formal finance

· Bank runs: After the 2024 collapse of “Ultimate Cycler”, panic spread, causing a brief but sharp withdrawal spike at microfinance banks.

· Cryptocurrency distrust: Many Nigerians now conflate legit exchanges (Binance, Luno) with scams, slowing adoption of blockchain-based financial solutions.

3. Regulatory paralysis

Nigeria’s SEC and CBN have banned multiple schemes, but enforcement remains weak due to:

· Jurisdictional gaps: Many platforms operate offshore, beyond Nigerian regulators.

· Legal loopholes: Some disguise themselves as “crowdfunding” or “community savings” clubs.

· Corruption: Whistleblowers allege that some officials take bribes to ignore fraudulent operators.

“Platforms like CBEX, MBA Forex, and Binomo lure desperate Nigerians with promises of unrealistic returns, often exploiting the growing interest in cryptocurrency and forex trading.”

4. Promotion of fraudulent initiatives

Following the endless debacle of Ponzi schemes and the financially distorted, disappointed and heartbroken victims they leave in their wake, it increases the tendency for more negative innovation in the minds of individuals with fraudulent mindsets and intents to harbour the idea of coming up with more treacherous Ponzi schemes disguised as investment programmes.

The economic fallout of investment scams in Nigeria

The widespread rise of fraudulent investment schemes has far-reaching consequences for Nigeria’s economy and its people.

One major effect is the reduction in investment in productive sectors. The billions of naira lost to scams could have been channelled into small and medium-sized enterprises (SMEs), agriculture, or tech startups—critical engines of GDP growth and job creation. Instead, this capital vanishes into thin air, leaving the real economy deprived of much-needed funding.

The human cost is just as severe. Poverty levels deepen, as victims—like Emeka, a civil servant who invested his entire savings—find themselves trapped in debt. This growing financial vulnerability widens the gap between the wealthy and the struggling majority, intensifying income inequality.

Additionally, social services come under strain. When families lose their savings to fraudulent schemes, many turn to already overstretched government assistance programmes. This increases pressure on public resources that are barely enough to support those already in need.

Read also: Court orders arrest of CBEX promoters

Case in point: the CBEX collapse.

The downfall of CBEX in April 2025 offers a clear example of how modern scams operate. The platform used aggressive marketing strategies, including fake testimonials and AI-generated profit screenshots, to lure unsuspecting investors. Its payment structure was classic Ponzi-style: early investors were paid with money from new entrants. Once the inflow of new deposits stopped, the entire scheme crumbled.

In the aftermath, more than 200,000 Nigerians lost their funds. Protests erupted in major cities, as victims demanded justice and the return of their life savings.

The way forward: Can Nigeria curb the scourge?

To tackle the growing threat of investment scams and fraudulent platforms in Nigeria, a multi-faceted strategy involving regulatory reform, public education, and alternative financial solutions is essential.

1. Stronger regulation

The Securities and Exchange Commission (SEC) should introduce mandatory licensing for all investment platforms, including those operating in the cryptocurrency space. Regulatory bodies must also collaborate with international agencies like Interpol to track and prosecute offshore-based fraudsters who prey on Nigerian investors.

2. Financial literacy campaigns

There is an urgent need to integrate investment education into school curricula to build long-term financial awareness from a young age. Additionally, regulators can partner with telecommunications companies to send public warning alerts via SMS, helping to curb the spread of high-risk investment schemes.

3. Alternative investment channels

Expanding access to legitimate, high-yield investment opportunities such as treasury bills, Real Estate Investment Trusts (REITs), and venture capital will offer safer avenues for wealth creation. Fintech innovation should also be encouraged to deliver products that provide competitive returns and reduce the lure of scams.

4. Public sensitisation

Members of the public must be continuously sensitised about the importance of due diligence before investing. This includes understanding the process of verifying platforms and organisations. Moreover, public education campaigns should highlight the realistic expectations of legitimate investments, especially the true nature of returns on investment (ROI), to reduce susceptibility to “get-rich-quick” schemes.

Read also: CBEX, affiliates not registered to operate as Digital Assets Exchange -SEC

Conclusion: A ticking time bomb

Ponzi schemes are more than just financial frauds—they are systemic risks. Without urgent action, Nigeria risks a loss of confidence in its financial institutions, further capital flight, and a generation of citizens disillusioned with formal finance. The solution lies not just in crackdowns but in creating real economic opportunities that make scams unnecessary.

For now, the allure of “easy money” remains strong. But as history shows—from Bernie Madoff to MMM—Ponzi schemes always collapse. The question is, how much damage will Nigeria sustain before the next one falls?

Key takeaways:
✔ Ponzi schemes drain capital from Nigeria’s economy, worsening poverty and instability.
✔ Weak regulation and financial illiteracy enable fraudsters.
✔ Solutions include stricter enforcement, education, and better investment alternatives.

Dr Oluyemi Adeosun is BusinessDay’s Chief Economist.