“An appraisal Of The Status Quo Of Ponzi Scheme In Nigeria” By Salam Olamilekan ismaiheel

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The Fundamental wheel and orbit of humanity is the act of its continuous existence which one of the Institution that guaranteed such is what can be termed Market Institution. What constitute such term differ based on the environmental relativity and one of its tranches is what is known as ponzi scheme in the shadow of today’s market institution.The do and don’t of the market institutional tranches in a forensic analysis has been discussed thereunder.


The status quo of today market institution in Nigeria has been continuously given the inhabitants of Nigerian Society headache on daily basis because of it worrisome operational method and one of the fundamental thing that constitute the headache is the legal position, the institutions that’s involves and the carriers of ponzi schemein Nigeria.

The work of this writer in a detailed analysis adumbrate on the position of ponzi scheme within the armpit of Nigerian legal system.


Ponzi scheme is an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks.1

In another dimension, ponzi scheme is a fraudulent investment that pays existing investors with funds collected from new investors.2

Why ponzi scheme?.

The rational behind the investment on Ponzi scheme in Nigeria can be put on the scale of irrational thinking by some investors because of the greediness for money without working hard for such. The analysis of the logic behind Ponzi scheme pyramid shows how the system work with an highlyrisky investment.3 Amongst the Institutions that are involves areas follows;

  • Central Bank of Nigeria
  • Security and exchange commission
  • Cooperate affairs Commission etc.



Where an act is legal from the point of law, then it is justiciable in court of lawwhich can give remedy toa party. But where an actis illegal from the point of law, then it is nullity in law which is not only bad but incurably bad which nothing can stand on it.

The Law is Crystal clear that Ponzi schemes are illegal and criminal. What makes ponzischeme illegal is the fact that monies are collected from the public with thepromise of repayment with interest. By law, such business is exclusively forbanks or bodies established by law to carry out such business. Any other

person is legally prohibited from carrying out the business of acceptingmoney deposit whether for the purpose of repaying with money or not. For the avoidance of doubt, section 67(1)4 of the Investment andSecurities Act (ISA), 2007 provides to the effect that no person shall invite the public to deposit money whether bearing or not bearing interestexcept a bank or body established by law for that purpose.


Also, sections 58(1) and 595 of Banks and other Final Institutions Act(BOFIA), 2004 provide that no person shall carry on financial business inNigeria other than insurance and stock broking except if it is a company dulyincorporated in Nigeria and holds a valid license granted by the Central Bank of Nigeria.


Under BOFIA, a person or company is regarded as carrying on or conductingfinancial business other than insurance and stock broking, if it solicits andaccepts money deposits from the public and pays interests thereon, as abusiness, by whatever name called. Section 1(5)(a) of BOFIA seesfinancial business as a situation where a “…Person accepts deposit from thegeneral public as a feature of its business or if it issues an advertisement orsolicits for such deposition.”

The combined effect of section 67(1) of ISA and sections 1(5)(a), 58,and 59 of BOFIA is that ponzi scheme is not only prohibited by law, it is infact a criminal offense. It is a financial business that is exclusively meant forbanks or statutory bodies established for that purpose. Anyone who wishes

to carry out such business must seek and obtain license from CBN beforeperforming the business.

Under ISA, punishment for engaging in ponzi scheme is a fine of N100, 000 and if it is a company that engages in the ponzi scheme, the company shallbe liable to pay N500, 000. But under BOFIA, the punishment is 5 yearsimprisonment or fine of N1 Million or both.6

The legality of the Ponzi scheme has been put to rest with the authority of the Court of appeal in the case of UNITRUST INSURANCE CO LTD VS AMBICO SENDIRIAN NIGERIA LTD7where it was held thus;

“Where a Contract is expressly forbidden by statute, its illegality is

without question, and the Courts are forbidden to enforce it, or allow

itself to be used to perpetuate illegality, or enforce same in all its

ramifications. It behooves on parties to bring to the notice of the Court

any illegality, and if this is done, it overrides all questions of pleadings

including any admission made thereon”.

With the aforementioned recent authority and theCourt of appeal decision in the case of OCHEDI & ORS VS CBN &ORS8 it is Crystal clear that Ponzi scheme is illegal within the confine of Nigerian legal system.



The ministry of Justice, EFCC and others stake holders in prosecuting an offender should ready to swing to action by prosecuting the perpetrators since the act has been declared illegal by a court of law.


All the Institutions that is Involved in the process of the act should ready to implement the policy already established by the law makers to curb the act.


The inhabitants of the Nigerian society should yield and follow court hint about the legality of Ponzi scheme and inform others about the consequence of participating in the act.


An act which has been declared illegal by a court of competent jurisdiction should be treated as abomination by the people of that particular environment because if they venture into such an act, it will always create chaos and problem in that society if they do not discountenance with such an act.



[1] Merriam Webster dictionary/meaning of Ponzi scheme

  1. 2. BEWARE: Engaging In Ponzi scheme Attracts 5 Years Jail Term Or 1 Million Naira Fine Or Both By O. G. Chukkol.

3.pyramid of Ponzi scheme [email protected] www.pyramidPonzischeme.com

  1. Investment and Securities Act (ISA), 2007
  2. 5. Banks and other Final Institutions Act (BOFIA), 2004

6.BEWARE: Engaging In Ponzi scheme Attracts 5 Years Jail Term Or 1 Million Naira Fine Or Both By O. G. Chukkol.

  1. (2012) LPELR-15417(CA).

8.(2018) LPELR -45316(CA).

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