How To Spot An Investment Scam In Nigeria

Investing money is still one of the best ways to get an inflow of cash to your account in Nigeria because it provides regular income, helps you to always outperform inflation and the best part is you do not have to actively work for it. Some people may have decided not to invest their money anymore due to the increased number of investment scams in the country recently but this is a classic case of “don’t throw away the baby and the bath water”. Instead of giving up on investments altogether, you can learn how to spot an investment scam in Nigeria.

Financial fraudsters have various tactics they use to rob people of their money. The next time a company approaches you with an investment opportunity, these are the things to have in mind;

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1. Increase Your Knowledge On Finance and Investment:

“No thief, however skillful, can rob one of knowledge, and that is why knowledge is the best and safest treasure to acquire.” – L. Frank Baum,

Many of the investment opportunities that turned out to be scams took advantage of the fact that a lot of people have no idea how money works. For instance, a company promised to pay a high ROI to investors and ran away with their money because these investors did not ask about things like the company’s business model, what their returns, predictability and sustainability of profit are. The average Nigerian has no idea what a business model is.

When you learn about anything, not just investment, and understand it, it is easier for you to make an informed decision. You will be able to know which investments are high risk and which are low risk. You can watch YouTube videos and also read books and articles about investments in Nigeria.

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2. Find Out If They Have A Tangible Business Model:

A company cannot give you an ROI out of thin air. Find out how they make money because it’s from their profit they give ROIs to investors. For some investment companies, their business model is: they receive funds from a pool of investors and give them as loans to lucrative small businesses and then use the profits to offer a fixed return on investment at the end of an agreed term to the investors. It is a red flag if any investment firm is secretive about their business model. Companies should be transparent about their dealings. You would be wise to stay away from such investments.

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3. Make Sure The Company Shows Proof Of Work And Track Record

Do not invest in a company that cannot show proof of work or track record of how they have done legitimate business and given their investors their return on investment consistently.

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4. Promise Of High Yield With Little Or No Risk

High yield investments usually have high risk. For instance if your investment is used to trade in FOREX, do not put your money there because FOREX trading is not sustainable. The same way you may get 1000% profit from one trade is the same way you may get a 1000% loss from the second trade. Besides FOREX, it is best to stay away from any other high risk volatile investment.

So if a company approaches you with a high yield investment and is not open about how much of a risk it is, it might be a red flag.

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5. Be Cautious and Skeptical

In the Brisk capital scandal, someone who wanted to invest contacted a company (Chive GPS) that does background check to find out if Brisk capital is legit. Chive GPS spoke with Joshua (CEO of Brisk capital) to verify his business’s portfolio and investment methodology. Chive GPS advised their client against investing with Brisk because they found out that there was no record anywhere to establish that the company did what they said they used the investments for. The client was saved from fraud because of this.

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Hire companies and individuals to do background checks if you can not do it yourself.

Do they have a website that shows what they do and shows their staff? Can their staff be found on social media like Facebook, Twitter, Instagram, LinkedIn etc. And does it show they’ve been active for a long time? How long have they been in business and how many times have they paid out ROI to investors without a hitch? Do they have testimonials from their investors? And do they have a physical office?

Some people are good and honest. They live their lives with integrity and fairness and treat other people well. Most times they are not suspicious of other people because they expect people to be like them. Investment scammers take advantage of this overly trusting people. A stranger who calls and asks for your money is to be regarded with utmost caution and skepticism.

Never invest in a company that gets defensive when you ask a lot of questions or that do not want you to do so. To be safe do not invest in a company that is less than two years old. Beware of anyone coming to pressure you to invest and not giving you enough time to think about it.

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6. Confirm If They Are Licensed/Regulated

Make sure to confirm if the company is licensed. Investment companies should have some form of registration or regulation, especially with the government.

Nigeria Investment Promotion Commission, Security and Exchange Commission (SEC), Special Control Unit Against Money Laundering (SCUML), Corporate Affairs Commission (CAC), Financial Services Regulation Coordinating Committee (FSRCC), The Nigerian Deposit Insurance Corporation (NDIC), Monetary Policy Committee (MPC). These are a few of the government licensing and regulatory bodies.

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