MMM!! ONLINE PONZI SCHEME (A Blessing Or A Curse To The Nigeria Economy)

Written By: EDIALE PRECIOUS (A 400 Level Student from the Department of Economics, Uniabuja)

It is well obvious that Nigeria is faced with recession and Nigerians are looking for ways to pave out of this recession so as not feel the heating effect of it. So of recent, we have witnessed several online Ponzi Schemes(OPSs), for example, MMM, Icharity, Givers forum, etc that aided Nigerians to earn Money easily while sitting home.
The government has raised growing concern relating to such activities stating it will adversely affect the Nigerian Economy (or Nigerians in particular) when the OPSs crashes. Some people has tagged it as “robbing Peter to pay Paul” and then “robbing Paul to Pay Peter”. In whatever case, we just know the money is been shared among the both and investing in OPSs is voluntary not obligatory and the risks are well stated in the websites that host these schemes.
Well, this article is focused only on briefing the blessings and cursing of these online Ponzi Schemes on the Nigerian Economy.

THE BLESSINGS:
Ever since this recession kicked in, Nigeria Producers and Sellers are extremely affected as the country is suffering from Cost Push inflation and Demand Deficiencies. So for producers to keep up, they ought to increase prices and such increased price results to lower patronage/purchase of their products(Demand Deficiency).
Thus, the rising influence of online Ponzi Schemes has enabled Nigerians to earn quickly without engaging in any productive activities. In turn, this has increased the disposable income(the income left to spend after paying tax) of many Nigerians and of which has led to the rise in demand of products or services that such individual couldn’t afford (For example, an individual who could not pay his child’s tuition fee due to the recession can bounce back to paying off his child tuition fee from the money earned through OPSs ). In this sense, we can generally infer that there is rising demand for products or services in Nigeria.
Increase in Aggregate demand means producers are selling more to consumers, selling more to consumers means producers are earning more profit, more profit of producers denotes increasing capacity to expand production and creating employment opportunities to accommodate the increasing demand.

Furthermore, as Nigerians are earning through these means quickly, there are greater chances of more investment capacity and capital generation to start up or invest more in a business. This is quite fair when compared to collecting loans from bank and still paying interest.

THE UGLY SIDE:

Earning through these online Ponzy Schemes is an advanced extension of transferred payment. Nigerians do not actually get involved in any productive activity and yet they earn money. On a normal ground, if someone was to earn such kind of money, such person must have engaged in one or two productive activity which in turn helps boost the Nigeria GDP.
But In such cases where there is more money and no corresponding increase in output, there are high tendency for inflation rate to rise since it’s now a case of “Too much money purchasing fewer goods”.
Although, the above negative effect will only hold if the money gotten from the schemes are re-invested again into OPSs.
In a case when such situation is prevalent, there is thus, nothing to boast of to actually export out of the country in order to balance the devalued Naira or balance of payment deficit

In Addition, Aside the central bank printing more currency note, the case of some Ponzy Scheme giving out extra $10 or more is another issue to ponder on. Could it be that the $10 is from the OPS revenue or the extra $10 is a portion of other individual’s money invested?
If the question is the former, then it is a sure case of increase in money supply since it is an indirect way of pumping in money into the economy. But if on the other hand the question is the latter, then the argument of increase money supply is invalid.

Finally, In a bid to meet up with important needs due to growing income from OPSs, Nigerians are likely to save less and spend a lot meeting those needs since they have strong expectations to invest later in OPS and get a return of the money spent. Given that someone’s savings is the part of income that he may likely invest, reduced savings therefore entails reduced investment

In summary, the ongoing online Ponzy Schemes will likely liberate Nigerians from the the challenging situation facing the country or worsen the current recession in the country. Therefore, it is left for the government and Nigerians to compare between the positive and the negative effects and consider the cost of either embracing the ongoing scheme or militating against the scheme.