The persistent depreciation of the local currency, the naira, has increased demand for foreign exchange as a means of inflation-hedging savings of extra money, there by increasing the risk of falling in to forex scams.
In addition, many Nigerians have turned to forex trading as a source of income, and some of these “traders” frequently look for investors with extra money to join them in their venture. Some businesses have genuinely added value to their customers, but many others have taken their investors’ money and stolen millions of naira from them.
Nigeria’s forex traders traded currency positions worth up to $1.25 million per day on average, according to a report published in 2020 by Dailyfx (a forex research company).
The amount of transactions that have already been made is sizable enough to support an industry, but it is also alluring enough to lure con artists whose goal is to defraud uninformed Nigerians of their hard-earned money.
Why Do Nigerians Succumb to This?
Investment experts have listed a number of causes for the development, including the victims’ ignorance, economic hardship, and greed.
Dr. Tayo Oyedeji, a businessman with interests in technology and investment management, explained that most Nigerians fall for forex scams by forex scammers because they lack the necessary knowledge to distinguish between real and fake currency. He shared his experience with a forex trader in public.
The founder of Overwoodng, an investment management firm, said, “Early this year, a young man walked into my office and offered to “help” us make 5% per month on all the investments in our portfolio. I did the math and saw that our $1 million will quickly become $1 billion in 15 years at 60% per annum from this gentleman. What a deal!”
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However, Oyedeji asked about the underlying asset and was informed that it was forex trading, unlike some undiscerning investors.
“I asked him about the underlying value he was creating. He said ‘nothing.’ We are just trading currency. I asked him about his track record. He said he has made 7.5% per month for the past two years.
“Note that 7.5% per month is 90% per annum, which means he almost doubles his principal every year. In this scenario, it means you can start with N1 million and have almost N40 billion in 20 years.
“He showed me his financial records that reflected the magical 7.5% per month and got my whole team excited about the prospects that we could all become magically rich without doing much work. Just give this magician $1 million and we are set for life at 5% return per month,” Oyedeji explained.
They claim that experience makes a better teacher (if not the best one). Oyedeji then made the decision to follow his intuition and wisdom.
“I am a little older and more experienced so I asked him to log into his trading platform so that I can see the magical gains. Of course, he suddenly got antsy.
“I promised him a lot of investments if he would show me the gains from his platform. PLATFORM, not records. He logged in and showed me his Q1 2019 record, and he actually gained about 30% in Q1 2019. Absolutely magical!
“I insisted on an expanded date range and sure enough, he lost all the gains in Q2, Q3 2019 and made a loss for the whole year. My team was shocked but I just grinned knowingly,” he added.
Oyedeji had smiled, but why? He claimed that if you can earn 7.5% a month, you won’t require investors, marketing, or the sale of a teaching course. Such an investor only needs a small sum of money and your complete dedication to your craft.
“The reason they are propositioning you to invest in their magic venture is because they don’t make 7.5% per month and they need your money to fill a gap. Anyone who can consistently make 7.5% a month will be the richest person in the world in a few years. Be careful, guys. I can assure you that less than 1% of FX traders can make more than 2% per month. If 2% per month is so difficult to achieve, how can these magicians offer you a 5% return? You will lose your money. Don’t do it,” he cautioned.
Electrical engineer Femi Bello, in contrast to Oyedeji, was not as fortunate or, to put it another way, as astute as the investment analyst.
He wasted no time in investing N800,000 into a company he knew little to nothing about when his younger brother, a student at Moshood Abiola Polytechnic in Abeokuta, approached him about doing forex trading through Tonso Elite Investment Limited.
Tonso is a portfolio investment platform that claims to invest in stocks and forex and is owned by a group of Moshood Abiola Polytechnic students. There is nothing wrong with making investments in the forex market, but Bello and other victims should have checked to see if the business’s owners had the necessary knowledge and moral character to carry out what they were proposing.
There are two businesses with the name Tonso, according to information from the Corporate Affairs Commission (CAC). Tonso Elite Enterprise Limited appears on the other, while Tonso Elite Enterprise is listed as “Tonso Elite Enterprise” with the CAC number RC 3043662 on the first.
Some detractors might not think this is a big deal, but what if one of the two is impersonating the other? Now that that is said, is the business legitimate or not?
Bello said, “From all indications, I and six of my friends had been duped by the students. Before we invested, they invited us for their investors meeting at Abeokuta last year. At that meeting, luxury vehicles were presented to their investors that had been with the company since inception.
“We didn’t know that that was a bait to get more people on the hook. After the meeting, we invested our money and actually got 20% returns on investment after 40 days.
“We got such returns three times before our fingers got burnt. After they failed to remit returns for three months, the guys were no longer reachable. At the moment, they have disappeared, abandoned their office and houses in the Ogun State capital.”
The COVID-19-imposed economic downturn and the unheard-of market slump, according to economist Dr. Sola Owoeye, are to blame for the threat. She also noted that many investors who lost their main sources of income when the economy declined expose themselves to scam investments and Ponzi scheme businesses that falsely promise yields of up to 100% in a short amount of time.
According to him, these forex scams and unrealistic return-promising schemes have destroyed the fortunes of many ambitious investors. He also stated that it has been an ongoing problem that has recently become more aggressive as more Nigerians have fallen victim to and are still falling victim to such schemes.
He said, “The trend has revealed that more Nigerians fall more for forex scams or Ponzi schemes during a recession or during lulls in the equity market, and that is because their source of income has been threatened or lost and they chose such risk over nothing. I know millions of Nigerians lost N300 billion to forex scams or Ponzi schemes in the past few years and over 2,000 speculators lost N900 million.
“Nigerians should be wary of such fraudsters who are the false prophets of the investment environment; they are the ill wind that blows no good and at whose sight you must flee. Investors should ask relevant questions like how can somebody give you 50% return? Where is he going to get the 50%? Where is he going to put the money? What is he going to do?”
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SEC speaks
Because forex trading is unregulated, as opposed to the Nigerian Capital Market, the Securities and Exchange Commission (SEC) has advised Nigerians to stay away from it.
The agency’s spokesperson, Efe Ebelo, said, “The attention of the Securities and Exchange Commission (SEC) has been drawn to the increased advertisements in electronic and other media soliciting investors to engage in leveraged online retail forex trading.
“The public is hereby advised that online retail forex trading is currently unregulated and consequently may be subject to abuse.”
She explained that until a framework for regulation of online retail forex trading is developed by the SEC, “any person participating or engaged in such investment activity does so at his or her own risk.”
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