When an investment firm assures prospective investors a 50% return on investment with little or no risk, the common reactions are that of greed or caution. Some are quick to jump in without consideration for risk, while others are sceptical and cautiously wait to see if it is true.
Irrationality in investing has been studied for years and one common reason for this behavioural pattern is greed and the quest for astronomical returns. Thus, in an economy like Nigeria where investment options are limited and returns are at historical lows, it’s no surprise to see the proliferation of unregulated high yielding collective investment schemes in the country.
One of such is HO Corn, an Agric business cum investment firm that claims it farms corn in the hope of making lucrative returns in six months after harvest. The company began in 2017, and since then, it claims it has gone four cycles and is now in its the fifth cycle of corn investment.
Nairametrics learnt that with an investment of N100,000 for a unit, which represents one (1) acre of land, an investor is guaranteed a whopping 50% return on the investment. That means investors are guaranteed N150,000 after six months with little or no risk involved. This return, without a considerable element of risk, on the surface seemed unreal, and as such, Nairametrics sought to probe the authenticity of this investment, and discover underlying risks, if any.
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Visit to HO CORN
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When Nairametrics visited HO Corn’s office inside Africa Re-insurance Building, located in Victoria Island, Lagos, there were mixed signals. While the human traffic of both existing and potential investors of the firm could convince an ignorant investor that there is no cause for alarm, the inability of the Head of Operations of the firm, Violet Andrew, to answer some questions posed to her by our analyst resurrected all doubts.
With a handful of employees, the company runs like any other investment company, with aspiring investors trooping in and out; a such number of visits is expected when investors are offered a once-in-a-lifetime deal.
Since 2017, HO Corn had operated outside the radar of scrutiny, as it limited its investors to a few individuals like a private placement. But its need for more capital to support its 30,000 acres of corn farm compelled it to expose its operations to the public via handbills. “We have been farming privately on our own without sourcing for funds. So, this is the first time we are coming to the public for funds.” Andrew told Nairametrics.
Is HO Corn a false prophet?
An Agric investment consultant, Olushina Taiwo, expressed his concerns when he spoke with our analyst. The Crop Protection expert explained that such an investment plan is a ‘Caveat Emptor, which means Buyers Beware.
According to him, such concept sounds like a Greek gift. “As far as I am concerned, it is too good to be true. If such investment could earn an investor 50%, it is cheaper for the company to approach banks for such funds.
“I have not seen a firm that will not want to cut costs to barest. How can you have access to a cheap loan and opt for an expensive option? To me, that is not logical and it calls for caution.”
While such promise is held with a pinch of salt, economic and financial expert, Kalu Aja, told Nairametrics that such high yielding investment is possible, even up to 100%, but pointed out an issue. “What sustains a guarantee?” He went further, “When the word “Guaranteed Returns” is used, the issuer of the investment promise, is saying and giving an assurance that comes what may, the promise made on returns (and principal) will be met. This is a promise, it’s not callable, reversible or negotiable.”
He, however, warned that investors must do their due diligence to avoid being victims of false prophets, or a Ponzi scheme. The HO Corn investment window has already closed and the cycle is set to begin this month, March 2020.
The Regulator speaks…
But for SEC, such high yielding investment could be deceitful. During an enquiry, SEC confirmed to Nairametrics that, “It is not registered with the commission. That’s like a Ponzi scheme; so many people will tell you to put N1000 to get N2000. It’s a Ponzi scheme, they are trying to convince you that they are registered with an insurance company and you’ve seen their office.”
Adding that “So many companies are like that, you’ve seen their offices on the ground. Maybe after the first investment, you collect your return, after the second and third nothing for you. You won’t see them anymore.”
Meanwhile, the spokesperson for SEC, Efe Ebelo, urged interested investors to, “Go to our website, you will see a list of fund managers there, anybody that is doing investment, if their name is not there, they are Ponzi (schemes). Anybody that is collecting money from people, their name must be on our website. If their name is not there, don’t give them your money.”
But HO CORN insists …
According to HO Corn, with an investment of N100,000 in a unit, which represents one (1) acre of land, an investor is guaranteed 50% interest six months after down payment. The company reportedly solicited for about 30 investors, which means the company will be in possession of about N3 million.
The Agric firm, which started with 1000 acres in 2017, has an investment duration of six months, so when a cycle is over, the investment ends as well, until another cycle opens; then another investment contract will be signed for another six months.
While speaking to Nairametrics on what informed HO Corn’s decision to make such an offer, Andrew explained that HO Corn is the farmer itself; the firm owns the farm located in Iseyin at Oyo State and does the farming without fear of revenue loss to the investors as the farm has an insurance cover from Anchor insurance.
This means profit will only be shared among a few hands— HO Corn and investors. This is a different approach to what is available in the market when compared to the activities of its rivals like Farmcrowdy and Thrive Agric. The duo is middlemen between the farmers and the investors, thereby reducing the profit that will go round.
“There’s money in agriculture if you can pay attention to it. Agriculture is stressful and capital intensive, but if you can focus, you can get the money. 50% is reasonable for us to give out. We’ve invested in the farm itself. So, once we harvest, we sell, we pay your money, there’s no binding commitment anymore at that point,” Andrew told Nairametrics.