NOSPETCO: A Classic Ponzi Scheme

I have always wanted to write about a classic Ponzi scheme that is making raves in Nigeria of recent but never got around to it until this afternoon when I read about what a like minded person wrote about it.

This is the short take: There is a company in Nigeria, Nospetco, who takes a minimum deposit of N450,000 (about $3,516) for a minimum of 6 months and gives you a flat interest of roughly 8.8% every month. Isn’t that interesting?

Yeah, it is interesting if you are a blind fool. What kind of investment will give that kind of return? At that rate, the investment yields to you 106% per annum. Well, there are investments like that but for the company to give you that kind of interest, they are getting something much more. And if that line of business is that good (heard they are into oil and gas or something weird like that) why wouldn’t they take a loan from a bank for say 22% pa?

There is an old adage that says nothing is new under the sun. Ponzi scheme, also called pyramid scheme are as old as my great grandfather’s grandfather (assuming that Darwin is wrong and I ain’t descendant of some black monkey. Duh!).

According to Wikipedia,

“A Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns (“profits”) to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business.”

Now, I can bet my a**e that 106% is way beyond what any business can legitimately pay investors in Nigeria. This is different for stock where the appreciation in value is dependent on demand and supply and the general believe of inherent value. Even when a stock goes too high then you know a burst is just a mile around the corner.

I also remember an old CBN (Central Bank of Nigeria) advert that use to say “when it is too good to be true, then it is not true”. I have seen people tell me (even some of my learned colleagues) that Nospetco has been around for 2 years plus. But some of the most notorious schemes even operated for over 5 years before the authorities came around to shut them down.

The truth is I might be wrong about this. But I would rather discover that I should have put my money there than discover that I shouldn’t have gone around their end.

For more about Ponzi schemes and the man it was named after, head on to Wikipedia.