Ponzi Scheme Activity and Its Impact on the Nigerian Economy

Ponzi schemes have become a persistent feature of Nigeria’s informal and digitally mediated investment environment. Although public discussions commonly emphasise the financial losses suffered by individual participants, the wider implications for household welfare, productive investment, financial-sector confidence and economic development remain insufficiently integrated in the literature. This article presents a structured integrative review of the drivers, evolution and economic consequences of Ponzi scheme activity in Nigeria. It synthesises recent studies on financial fraud, investor behaviour, financial literacy, digital finance, institutional trust and consumer vulnerability, while incorporating evidence from Nigerian regulatory developments and major investment-scheme failures. The review indicates that participation in Ponzi schemes is not adequately explained by greed or financial illiteracy alone. Economic insecurity, declining purchasing power, limited access to rewarding formal investment opportunities, behavioural biases, social-network influence, technological convenience, regulatory latency and institutional distrust interact to increase investor vulnerability. Ponzi activity affects the economy through several transmission channels, including household wealth destruction, indebtedness, reduced consumption, diversion of capital from productive activities, business distress, erosion of confidence in legitimate financial institutions and increased regulatory and enforcement costs. These consequences may persist after a scheme collapses because victims experience financial scarring and may withdraw from formal investment markets. The article develops the Ponzi Economic Transmission Framework, which conceptualises Ponzi activity as a five-stage process involving vulnerability formation, trust mobilisation, speculative capital diversion, scheme collapse and economic transmission. The framework introduces the concepts of fraud-induced financial disintermediation, household balance-sheet scarring, trust-contagion effects and regulatory latency. The article concludes that effective prevention requires an integrated strategy combining financial capability, real-time market surveillance, platform accountability, rapid enforcement, investor-verification systems and improved access to credible investment opportunities.