Two years after the popular Mavrodi Mundial Moneybox (MMM) Ponzi scheme crashed with millions of Naira lost, Nigerians are starting to flood towards Loom, another scheme that promises astonishing returns on investment.

MMM penetrated the Nigerian market in 2015 with over 2 million people signing up for the scheme by the time it crashed in December 2016.

Despite the loss of billions to that scheme and many of its ilk, Loom Money Nigeria is starting to gain widespread following among Nigeria's online community.

Loom is a peer-to-peer pyramid scheme which involves people being invited to invest as little as N1000, or N2000, or N13,000 and get as much as eight times its value within a short period of time.

The Loom pyramid is grouped into four colour-coded levels - purple, blue, orange and red. Whoever is the first to sign up for the group sits in the red level, which is the central level, and gets the payout when the group fills up.

Two people sit in the orange level, while four investors fill the blue level. The purple level takes new entrants with eight spots open.

Once the eight spots in the purple level are filled, the group splits into top half and bottom half as the investors in the outer levels move into new levels. 

The new groups of seven investors each then have to recruit eight new investors to once again break the circles into another two groups.

Investors are typically invited to join a WhatsApp group and advised to get as many other investors as possible because the scheme only works if it keeps a steady stream of new investors to pay earlier investors.

The more people are recruited into the group, the quicker it breaks and the quicker the payouts are to investors. The initial investment is usually paid to the group admin who sits in the red level.

A typical pyramid structure of Loom Money Nigeria (Pulse)
A typical pyramid structure of Loom Money Nigeria (Pulse)

If you invest N1,000, you get N8,000; if you invest N2,000, you get N16,000; and if you invest N13,000 you will get N104,000.

In a country with millions living in extreme poverty, and economic challenges frustrating its youthful population, it's not much of a surprise that Nigerians are open to get-rich-quick schemes.

Sandra, a polytechnic student, told Pulse that she invested N1000 in Loom because she spent a chunk of her school fees to invest in a business venture that's yet to yield returns she hopes to make back from Loom instead.

"The payment of my school fees is due next week, so I'm desperate to get money," she said.

Even though she was promised a payout 48 hours after investment, she's yet to get one after four days and is desperately trying to recruit her close friends and social media followers to invest in the scheme too.

With the way Loom operates, it's clear to see that it's not a sustainable investment scheme and that people will inevitably lose their money in the system.

When investors start to dry up, groups will take longer to fill up, and newer recruits will lose their investment without any payouts. This will only be averted if there's an unending supply of new investors, an impossible feat.

Over the years, the Nigerian government has issued several warnings to Nigerians to stay away from investing in Ponzi schemes that involve unregistered investments, unlicensed sellers, secretive and complex strategies. 

Loom Money Nigeria only works now because earlier investors are being paid with investments acquired from the recent ones. Once that system slows down, Nigerians are simply left with a looming disaster.