New Crowdfunding Regulations in Nigeria Target Ponzi Schemes
Nigeria’s SEC is creating a no scam zone
With the economy on lockdown and with oil prices doing their best Neymar impression, Nigeria is staring at an economic recession in the face.
The last time the country went through an economic downturn, millions of people were hoodwinked into believing the Ponzi scheme MMM was a crowdfunded stimulus package from the Russian gods.
Nigeria’s Security and Exchange Commission has been touting crowdfunding regulations for a while. The body has now released draft regulations, which, on the surface, seem oddly timed.
However, viewed from another perspective, SEC could be anticipating that the same circumstances that made many Nigerians end 2016 in tears could resurface in COVID-2020.
The new regulations seem pro-consumer, which could be read as being anti-business, but the two needn’t be mutually exclusive.
SEC is expanding the capital market by giving MSMEs a pathway to raise money online and in a manner that protects investors. But one curious aspect of the proposed regulation is the creation of a different category called digital commodities investment platforms where startups like Agropartnerships, PorkMoney and Farmcrowdy would likely fall into.
DCIPs are under a different set of rules and must apply for a certificate of “no objection” before the regulations take effect; there’ll also be strict oversight of their projects.
But the part that would worry DCIPs the most is that they’ll be prohibited from conducting transactions through their own apps and websites. SEC is essentially separating the digital platform aspect from the commodities investment aspect, or at least, keeping the two far apart.
More clarity is needed on the “why?”.
SEC is trying to stop a new Mavrodian-like scheme where money, not commodities, ends up being moved around. But crowdfunding-enabled DCIPs who style themselves as agrotech companies and fintech’s cousins must be wondering what separating them from their online platforms has to do with consumer protection.
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