The Nigerian National Assembly has passed the Investment and Securities Bill, which aims to strengthen the functioning of the capital market and protect investors.
The bill includes provisions for more stringent punishment for operators of Ponzi schemes and illegal investment schemes that have led to the loss of billions of naira and have affected confidence in the investment climate in Nigeria.
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The Senate President, Ahmad Lawan, stated that the bill is expected to protect investors, adequately regulate the market, reduce systemic risks, and provide for more stringent punishment for promoters of Ponzi schemes.
The bill awaits presidential assent to become law.
One of the significant developments that the new bill brings is the prohibition of Ponzi/Pyramid schemes.
These schemes, also known as pyramid sales schemes, are a money laundering system where investors are lured in with the promise of high returns on investment after a specified period.
The system runs in a somewhat cyclic fashion by paying old investors with deposits of new investors but usually becomes unsustainable when the backlog of old investors eligible for payments exceeds the investments coming into the system.
According to Nigeria’s Securities and Exchange Commission, three million Nigerians lost N18bn when the popular Ponzi scheme, Mavrodi Mundial Movement aka MMM, crashed in 2016.
As of 2022, Nigerians have lost over N300bn in Ponzi schemes in five years, according to a report generated by the Norrenberger Financial Investments scheme.
Promoters of Ponzi schemes will now face a jail term of not less than 10 years, and the bill also prescribes asset forfeiture and a fine of 10-20% of the amount of money collected from victims.
The Chairman of the House Committee on Capital Markets and Institutions, Babangida Ibrahim, stated that the ISB 2023 was capable of transforming the capital market, attracting foreign investors, and boosting investors’ confidence, among others.
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