Is proof of funds a fraud?

The proof of funds loans has allowed over 100,000 Nigerians to travel abroad for schools or immigration without having the funds demanded by the embassies. This is a fraud but even then, what are the implications for Nigerians?

The proof of funds loan is the most important financial product to have impacted almost 100,000 middle-class Nigerians over the last two years. It has been the foundation to enable most Nigerians that have achieved the “Nigerian dream” to japa

But could this be the biggest fraud of all time? 

What is proof of funds?

This is a signed official statement of a bank account that a student or an immigrant has the funds to settle or take care of themselves in a foreign country. Embassies have been demanding this for centuries, especially the UK, Canadian and Australian embassies. 

What’s the genesis?

Let’s understand that to say our economy is battered and the country itself is messed up is an understatement. It’s expected for anyone with a shred of sense to run for their lives. Maybe if I didn’t think staying in cold weather too long would kill me, I would be running too.

The hitch is with a bad economy; people don’t have the money to provide proof of funds. Let’s think about it; If they had thousands of pounds stashed away somewhere, they might not be so desperate to run off to a foreign land in search of milk and honey. 

This is where the smart lenders entered the game. 

How does it work?

Lenders saw an opportunity to provide those with migration plans with a profitable loan product. Tons of lenders do this. They give individuals the large loan needed to show proof of funds to the embassies.

You’re probably wondering what’s stopping Nigerians from simply taking this loan and using the money to japa, never to be seen again, the same way they treat other loans. Well, the bank account containing the loan is controlled by an internal bank friend collaborating with the lender. The account is locked, so the borrower has no access to the funds. The money only belongs to you on paper.

If you take out a loan like this, you pay monthly interest in the region of 3%. So proof of funds of £20,000 means ₦20 million (yeah, a pound is about ₦1,000) and ₦600 thousand per month for six months. Good luck to all who set out on this journey.

Is proof of fund fraud?

Now let’s do a quick English language class. What exactly is fraud? The answer: a false representation of facts. The embassy has requested confirmation that you have funds to support yourself when you make the big move to their country. But you borrowed money that you definitely don’t have to prove, deceiving the authorities. 

It’s a fraud. No two names.

Take it easy; I’m not here to judge. I, too, did this when a family member was going for a post-graduate program. I used my boss’ account as a guarantee of funds. Don’t quote me; I will deny you. 

What would probably happen? 

As everything is abused by Nigerians, this would probably unravel soon. The outcry has already begun. Nigerians have started arriving in these countries with only little to their name and may soon become destitute. Many have already found themselves in less-than-ideal conditions; some have been asked to withdraw from universities because they couldn’t pay the balance of their fees. Others are homeless and forced just to lay their heads anywhere they find. 

These countries will soon find out that these guys never had the money in the first place. 

Would they ban us as the UAE did? Maybe not. But they could start doing what CBN did to those who asked for licenses (that’s a story for another day) by forcing them to either open an account in a foreign country or pay school fees and accommodation costs 100% ahead of visa application.
Although things are undeniably tough in Nigeria and many of us understand and maybe even sympathize with the japa craze, the sad reality about cutting corners like this is that those coming behind you will probably have to pay for your sins too.

MMM Ponzi – There is always a Mugu in Lagos!

I was doing a random research of recent and stumbled on the current list of top websites in Nigeria (October 2016). The list is dominated by the usual names – Google, Yahoo, Facebook, Nairaland, Linda Ikeji and MMM Office. Wait, what’s MMM Office?

It’s a Ponzi scheme and it has its own Wikipedia page. It has taken Nigeria by storm, so much some people are almost selling their cousins just to invest money there. The relevant authorities have however turned a blind eye, for now.  The Guardian Newspaper recently wrote about it; the comments from Nigerians would make you weep!

It’s amazing that 10 years after I wrote about Ponzi schemes in Nigeria, and that it would come back again, it actually did. Wait, does that make me a prophet? Of course, I’m not. If I was, I wouldn’t be blogging but flying my own private A380 around the world.

Deji, can you just concentrate? Focus!

10 years ago Nospecto ravaged Nigeria with promises of 106% return per annum. I remember quite a number of friends and colleagues (luckily no family members) piled in their salaries into the deal expecting a big payout because they knew someone who knew the cousin of the uncle of someone who got a payout. I’m lost!

It got so bad that many account officers of a certain bank used their customers’ money to do kalokalo. The bank later perished but it wasn’t because of this. I mean, who knows?

But that wasn’t even bad enough. Penny Wise came out with a scheme that blew my hat off!  This is how it worked. You give them a paltry N2,500 for a slot and over a period of 9 weeks, the scheme will pay out a cumulative of N251,390. Effectively, you multiply any amount you put inside by 100 in 9 weeks. Interesting!

I blogged about it and someone even said I would die of poverty! The vitriol was so caustic! I didn’t die, I’m not poor either but he got scammed.
Anyway, like all pyramids go, the bubble burst and the schemes went tits up.

It’s 2016 and MMM is the new King of Ponzi. Everyone is on it.
Everybody knows my stand on Ponzi schemes – if you do it, I cut off all ties with you. I have absolutely no apologies. Before you get your guns and take potshots, two reasons for my stance:

You sincerely believe that the MMM Ponzi Scheme is real
It means you lack an analytical brain and would walk right into an oncoming truck believing it’s Lego. I know some Ponzi schemes may appear legit and you need investment banking grade knowledge to unravel it. That’s understandable and if the illegality is explained to you, at least, you can comprehend and run for dear life. However, if you earnestly believe that MMM stands for something legit and logical, then you are probably not smart enough to be trusted with anything important.

You know that MMM is a Ponzi but want to take advantage
Ponzi schemes are as illegal as they come. Well, not as illegal as shooting someone or doing some of the things Donald Trump joked about. To take advantage of illegality just for the money means you are greedy, desperate and can do anything for money.

You are probably not someone I can trust with anything important.
I don’t run a business but I know that if a staff of mine does MMM, he’s on his way out.

I can bet my next month salary that the MMM Ponzi will collapse soon – either from its own weight or when the Central Bank moves in like they did 10 years ago.

See you in 2026
Well, I would be back in 10 years’ time to talk about the next Ponzi scheme. There will always be a Mugu in Lagos.

Addendum
I wrote the following articles 10 years ago. I didn’t have anyone to help proof-read then so be careful of the grammatical errors – don’t read aloud as you could choke.
NOSPETCO: A Classic Ponzi Scheme
Pennywise HYIB: The king of Absurdity
Original article on BellaNaija.com

4K TV – The New Gimmick in Town

I have tripped over more 4K TV cables in the last few weeks than all the bus drivers bashing cars in Lagos.
Suddenly 4K became the rave. You wonder what 4K is? 4K is to HDTV as HDTV is to SDTV. If you don’t know SDTV, you may want to read here. 4K is sometimes called UHD by purists. But purists be damned!
4K allows incredible fidelity of visual content. You only need to see any of those monsters on display and you are hooked forever. The biggest challenge is content though. Without a native 4K content, there is nothing glorious and orgasmic to see.
So there lies my problem – what are the 4K TVs doing in Nigeria? There are no 4K discs to watch and the internet is too poor to stream 4K content from the internet.
I guess maybe LG and Samsung are playing on guys’ greed or maybe lack of awareness. As far as I’m concerned, this is just an expensive gimmickry.

Crashing the Cost of Banking: The Bitter Sweet Experience

The Central Bank (of Nigeria, if you really want to know) has been at the fore-front of financial inclusion, and oh, at the forefront of cashless economy. Obviously they decided to mash the two together.
Kudos can be given to CBN for forcefully yanking our sorry backside from comfortable banking to make things really cashless. Considering that government and regulators are not known for speed or innovation, this is extremely commendable.
So the CBN started the cashless thingy, did a million road shows and I guess the people we hardly see, the real banking customers, complained about the cost of everything. CBN came back and said “From December 17, 2012, thou shalt not demand for N100 when your customers use other banks ATMs again!” What?
You see, the N100 from ATM is almost synonymous with N20 collected by Askaris. You can’t dodge it. But then it cost money, I mean real money – mostly in Benjamins, to make the ATMs and others e-things work. Nothing goes for nothing.
The NCC came around and said, “From February 2013, thou shalt not collect more than N4 from SMS sent within Nigeria.” That is going to hit the pretty backside of SMS alerts. That itself is a story for another day.
Well, the CBN is not done yet – there wouldn’t be any minimum balance any minimum balance anymore. By this time, bankers are looking around bewildered.
Ok, so where do this all lead to? Simple English: Financial Inclusion.
The reality is, the cost of banking could be a barrier to quite a number of customers. Better put, most customers. Take the annoyances – COT, minimum opening balance, minimum balance, ATM fees, transfer fees, bla bla. Customers simply run for the gates. By crashing the fees, CBN is making sure no one has a real excuse for not having an account.
I can see this game evolving over time – I expect that CBN might banish some other fees, put a max on interest that can be charged on loans, a minimum percentage that must be lent to SME (wait, what happened to that 10% of PBT to be invested in SMEs?). Some even think the days of COT are numbered.
The take from everyone is this – in the short term, there would be a dip in revenue but with rapidly growing number of customers flocking to the banks and echannels, the revenue and potentials will pick-up. This happened in telecoms, I hope and sincerely pray it happens in banking.

Driven by faith, Government hikes electricity tariff

Electricity prices will take a leap, not necessarily of faith, on June 1, 2012 as government is saying we need that to attract investors.
Now that is faith which is an evidence of things not seen as I haven’t seen anything this government, and the ones before, have done even when they tell us to just believe. Would you call our government faith healers who dispense anguish to cure the malaise called irregular power supply?
But then what can I do? Maybe load up on electricity and see how long I can ride the cheap prices until realities catches up with me.