The Nigeria Deposit Insurance Company (NDIC) is reminding people to stay clear off “wonder banks”. This may be a timely call, although the NDIC is always saying this. The double impact from the recent pandemic and falling oil prices will have a negative effect on the Nigerian economy. The government plans to slash its 2020 budget by over 14% and announced a $2.7 billion stimulus package. But the Nigerian currency, the naira, has taken a knock with a 5% devaluation. Household incomes may not be able to handle the inflation pressure that may follow.
Like we witnessed during the 2016-17 recession, people are going to look for money by any means possible. They’ll try to borrow, and online platforms are their fastest options. Digital lenders are anticipating this will happen and they’re concerned about the high risk of defaults that may follow. So they’re making adjustments. Loan amounts may be capped for repeat borrowers and customer verification checks are going to get more thorough.
If these processes are too stringent for people, they will jump at the next available option: wonder banks or ponzi schemes. We’ve seen this happen before with MMM and other schemes from 2016. When these schemes crashed over three million Nigerians lost more than $49 million according to the NDIC. Somebody has probably hatched a plan to roll out such platform if COVID-19 continues to spread across the country. The number of confirmed cases in the country has jumped from three to 30 within two weeks.
But whatever new scheme emerges, it’ll likely use a different strategy than previous ones.
An early attempt was a platform called Racksterly. Although it predates the current pandemic, Racksterly modelled itself as an advertising platform. It got people to pay a certain amount with the hopes of earning more than double that amount whenever they shared certain ads on their individual social media accounts. Because it cloaked itself as an “advertising platform”, many users didn’t believe it was fraudulent. It crashed after Flutterwave and Paystack declined to process its payments.
Racksterly could be a model to other ponzi schemes should the Nigerian economy sink further. And people will jump at it, as many tend to do.