Within the last few years, we have witnessed a lot of investment and financial fraud within the social space of our beloved country Nigeria. In this piece am going to highlight:
1. What you need to know about Investment and Investment alternatives available (case study of Cowry Asset management and Polyunwana Micro finance bank), etc.
2. What are the factors to be considered before Investment.
What is Financial Investment? Financial Investment can be said to be the act or process of investing money for possible returns or profit.
“Investment is the dedication of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money or effort. In finance, the purpose of investing is to generate a return from the invested asset”- Wikipedia.
Now what is Financial fraud? Fraud in general is a deliberate act to mislead someone by deception for personal or group benefits.
According to Longley, fraud is a broad legal term referring to dishonest acts that intentionally use deception to illegally deprive another person or entity of money, property or legal rights.
Unlike the crime of theft, which involves the taking of something of value through force or stealth, fraud relies on the use of intentional misrepresentation of fact to accomplish the taking.
Investment fraud is a situation where someone deliberately present an investment opportunity to general public with the primary intention to defraud them through fake returns promises and general misstatement of facts.
What you need to know about Investment:
As defined above, the primary purpose of Financial Investment is to make returns/profit. They are different types and Investment options available out there such as
A. Investment in shares/stocks and bonds
B. Bank products Investment
C. Treasury bills
D. Start up Investment
E. Investment by partnership/collaboration
F. Investing in an existing business
It will be my pleasure to give a little highlight
✓ Investment in shares/ stocks and bonds
Share/stock is generally traded in the floor of stock exchange. Shares are unit of equity ownership of a corporation and a bond is simply a loan taken out by a company. Instead of going to a bank, the company gets the money from investors who buy its bonds. In exchange for the capital, the company pays an interest coupon, which is the annual interest rate paid on a bond expressed as a percentage of the face value. A holder of bond earns interest, while a shareholder earns dividends. People buy shares for dividends or to sale when the price increases. For instance, MTN share is currently trading at N214 compared to below #N200 it was issued.
Treasury bill is a short term debt issued by the government.
For more details or guide on shares, bond and treasury bill, please contact Cowry Asset management company office
Or Isu Egwu Okwudili, the Vice President of Cowry Asset Management for sound Financial and Investment advice.
✓ Bank products Investment
Many Banks offer different varieties of Financial products such as savings and fixed deposit. For instance, Polyunwana Micro finance bank offers the following Investment products: Fixed deposit at 15% per annum, savings product at 12% per annum at compound interest and donor support scheme at 18% per annum. For enquiry on this, contact Chukwu Uche Johnson, Nancy Ben or Chukwuma Chinegbo Ezeigbo.
Note that many Banks have similar Investment options, please visit any Bank for further enquires.
Start up Investment
The fall of many Investment schemes have really opened the eyes of people that Nigerians have excessive amount of money somewhere. Imagine Investing N50m or N125m in an investment fraud. This amount can start a lot of businesses in Nigeria and create employment with beautiful Investment returns.
If you have from N5m and above, you can contact a professional to help you develop a business plan with little fee. Anthony Chikaodiri Oko is always available to assist you and I can as well assist you on this.
Investment by partnership/Collaboration
Many people have excessive amount of money, but lack business ideas. You can partner with someone with business ideas to build a business empire. Identify those with genuine business ideas and be ready to be part of the the business from the registration stage to commencement stage. Be active partner in any business partnership; either directly or indirectly.
Investment in an existing business
 We have a lot of small businesses operating within our locality with limited capital. You can invest in the business by firstly upgrading the business from business name status to limited liability company, constitute a board and management team and then channel the excess capital you have into building from the existing business.
What are the factors to be considered before making an investment?
Many people have fallen prey to a lot of Investment scams by not doing due diligence of the business scheme they intend to invest in. For record purposes, no Investment can offer you more than 5% per month no matter how lucrative the business is and there is no miracle that will turn N20,000 to N40,000 in an hour or two.
Many investment fraud schemes promise investors of up to 12% per month or a week and employ influencers. For instance, a lady promised you a return on investment of 15% per week for a storage business. Common sense should have prompted you into asking what type of storage is taking a week to increase in price to the point of getting such returns?
Anyway, let’s look at the factors to be considered before investing in any business.
✓ Who are the board of directors?
 Any business that presents a single individual to the public as Director and is soliciting for fund to make expansion is likely fraudulent. No serious business with a clear vision and mission that needs a public fund to expand especially if it is a one man business. The expansion that cannot be financed by a bank that collects less than 30% per annum and less than 3% per month is a fraudulent expansion.
✓ Who are the management team?
 Investing in a business with faceless management team is the highest risky business with 2% probability of success. Study who the management teams are, what are their past experiences and achievements, what are their qualifications etc. A weak management team will certainly produce weak results.
✓ What exactly are they offering?
 I have been privileged to give a business review to some of my senior colleagues and friends. The best way to identify an investment fraud is secrecy. Anyone who wants you to invest in his or her business but is not ready to let you know what exactly he offers is a fraudulent person. For instance, you want me to invest in a a storage business and you don’t trust me to know your packing store, you don’t trust me to know when you buy the product and how much you bought the product. So, before investing in any business, please study what the company is offering to the public and their mode of operations.
✓ How long have they been in the business?
Many people rush into investing in a business without directions. Someone registered a company name today, tomorrow they start mobilising funds… What experience has the person accumulated in that sector? Please, any business that has not existed for a minimum of 3years is very risky to invest in.
✓ Who is the company’s Auditor and Consultant?
In my years of auditing and consulting services, no serious business can succeed without the services of an auditor and a consultant. An auditor looks into all the details in the financial reports, both the assets, expenses, equity and liabilities, issue a management Letter to the board or management for any issue he considers not in best practices and when satisfied that all the necessary information is available to certify the statement, he will issue what is called unqualified opinions. When he feels that some items are missing, he will issue opinions with certain clauses. A company without a consultant or auditor is a fraudulent company.
✓ Audited financial statement
Any company without at least 3 years audited statement is a risky company to invest in, unless it is a start up that you are fully involved with all the necessary paperwork.
✓ Tax clearance certificate
Imagine investing in a company that is not paying tax to government, what it means is that the company is not existing in the eyes of the government. Request for the tax clearance certificate to know how well the company has been doing for the past 3years.
✓ Professional bodies
Any company that at least minimum of 2 to 3 of both the board and management team doesn’t belong to professional bodies relating to the areas of operations is a very risky company.
As a Chartered Accountant and certified banker, I can rarely accept to involve in some activities, because I know the rules governing my professional bodies. So, be sure you are investing in a company with integrity and professional membership.
✓ Lifestyle of the promoters
You must take a review of the person offering you Investment opportunity, lifestyle years back and the present lifestyle he or she is showcasing. No serious organization succeed by doing millions of giveaway in social space, giving donations almost every Sunday in the church, buying cars as gifts, etc. Are they making the donation, giveaway or giving the gift is out of profit or capital? Please, don’t be deceived by what you see people showcase that you can’t be able to reason independently.
✓ What is the asset base of the company?
 You can’t possibly invest in a company that only leverage on public funds with no asset base from the investors. You can get this through interpretation of the financial statements and it will be a good guide.
✓ Regulatory bodies
Imagine investing in a company that no regulatory body is overseeing their affairs, what it means is that there is no one to hold the company or the investors responsible for any wrong doing. Request for all the regulatory permission to the company and verify them before you invest.
✓ Legal status
Have you studied the company memorandum and article of association? Did they state that their mode of operations is soliciting fund from general public? Please ensure that a company has a legal status to invest in the area they are soliciting for funds before you invest. Do they file returns to CAC? This is what you can do through independent investigations.
In conclusion Financial and Investment fraud is as a result of lack of Financial and Investment intelligence. If one can do due diligence before investment, most of these scams going on in our society will never happen. You don’t invest in a company without the above factors and expect then to succeed.
Disclaimer: This is a personal opinion and not Investment advice.
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Otta Enya Ifeanyichukwu, ACA, Auditor and Tax Consultant, writes from Port Harcourt.Â