The Effect of Fraud on the Performance of the Banking Industry in Nigeria

 The Effect of Fraud on the Performance of the Banking Industry in Nigeria (A Study Of Eco Bank Nigeria Plc, Abakaliki Branch)

 The Effect of Fraud on the Performance of the Banking Industry in Nigeria – This study investigated the effects of banks frauds on the performance of the banking industry in Nigeria in ECO bank Abakaliki branch. The purpose of the study is to find out the effects of bank fraud on the performance of banking industry.

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The specific objective of the study is to evaluate the effects of fraud on the financial performance of the banking industry. The researcher used description survey in the research and questionnaire which was the main instrument of the study was administered to 27 respondents comprising Directors, managers, cashiers, supervisors, clerks and uncategorized staff management who were used. The researcher analyzed the data collected using percentages. Major findings of the study were that fraud is the main causes of bank distress in our banking industry. Similarly, the capital bases of the bank have been affected as a result of fraud and the liquidity position of the bank is affected. In considering the result of the study it is obvious that fraud affects the bank to the extent that they constitute risky variables between the bank and the growth expansion development but fraud is a problem which negatively affects banking performances thus inhibiting economic development.

The Effect of Fraud on the Performance of the Banking Industry in Nigeria  – Introduction

Fraud is controversial general issue, which is a serious and diverse attachment to effort towards the development and progress of any establishment. It is a major predator of the business world and unyielding factor to all investment of human endeavors. Perhaps because fraud has received an extensive attention in the academic circles and, due largely to fact it has been over flogged in Nigeria, it has a definitional problem.

Internationally, no precise legal definition of fraud exists (Dye in Shah 307). Hornby (1995) defined fraud as criminal deception. On the other hand, Ovuakprie (1994) sees bank fraud as any activity that lead to dishonest or unfair dealing. In its lexical meaning fraud is an act or course of deception of trickery deliberately practiced in order to gain some advantage dishonestly. kartudu quoting Tanko in Damage  and Hanid (2005) defined fraud as the use of deception with the intention of gaining an undue advantage, avoiding an obligation or causing loss to another party.

To the Nigerian general public “fraud is commonly known as “corruption” or “419” relates to section 419 of the criminal code of Nigeria.

Fraud includes deception, bribery, forgery, extortion, corruptions, theft, conspiracy, embezzlement, misappropriation, false representation, concealment by bad faith, dishonesty, unfairness, unfaithfulness, perfidy, and the likes. In all cases, it involves a person or persons in public office and it is always aimed at receiving financial benefit either immediately or in future. It spoils, taints, deprives, destroys or degenerates a hitherto legally thriving system.

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Therefore, for any fraud to constitution there must be dishonest intention to benefit the perpetrator at the detriment of another person or group of persons, this issue of bank frauds, forgeries, fiddles, theft defalcation and other deceitful practices, have in recent time assumed unprecedented proportion. The higher turnover of the problem is capable of seriously undermining the growth and development of banks. Nigerian Deposit Insurance Corporation (NDIC) reported that the total causes of bank frauds and in Nigeria in commercial and merchant banks as December 1995 amounted to N1 billion out of which 22.5% was potential loss. Based on this report in 1995, the number of distressed banks rose from 89 to 125, the recent banking capitalization representing 52% of the banking industry. This alarming degree of distresses created a great fear on banking and confidence was lost by the potential customer, especially the shareholders.

This ugly situation results to loss of customer’s and capital based of bank which led to collapse or closure of many banks in the country Nigeria. It is based on the forging that this project is essential.

The Effect of Fraud on the Performance of the Banking Industry in Nigeria – Statement of Problem

The banking industry though has been giving out its vital functions of being a change off in economic development of Nigeria in all branches, yet its operation over years not all that healthy. This is because of the most dangerous incidence of fraud and other sharp practices.

This divulges that the environment for bank business in Nigeria nowadays is risky and disastrous. This is so because of irregularities and malpractices.

In order to regulate economy like ours, this unappealing trend seems capable of reducing the increase or growth of banks. Today, many banks cover up from being identified. They would rather leave the fraudster with his loot than losing their trust among customers.

In the explanation of above, fraud appear to constitute risky variable that stand between banks and their progress. Banks now have the dilemma of losing over N3.5m to Nm annually, in the name of fraud as it has been part of the banking system. This situation, like in Nigeria reached its  peak between 1991, when difficulties. (Adewunmi, 1996). In spite of all these however, there has been an increase in the number of bank in fraudulent act.

The Effect of Fraud on the Performance of the Banking Industry in Nigeria – Objective of Study

The general objective of this study is to evaluate the effects of fraud on the performance of the banking industry in Nigeria.

The specific objectives involved:

1.            To determine the effects of fraud on the profitability of banks.

2.            To ascertain the effects of fraud on the capital base of banks.

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3.            To determine the effect of fraud of the liquidity position of banks.

The Effect of Fraud on the Performance of the Banking Industry in Nigeria – Research Questions

Based on the bank fraud, the following questions were been entertained with regards to its effects on the banking industry performance ECO Bank Abakaliki branch is the sample of the study.

1.            To what extent does fraud affects the profit level of bank?

2.            How does fraud affects capital base of bank?

3.            To what extent has fraud affected the liquidity position of banks?

Formulation of Research Hypothesis

Based on the research questions formulated it is hypothesized that:

1.            Ho: Bank fraud has not in any way affected the profit level of banks.

Hi: Bank fraud has affected the profit level of banks.

2.            Ho: Bank fraud does not affect the capital base of banks.

Hi: The capital base of the banks has affected by bank fraud.

3.            Ho: Fraud has not affected the liquidity position of banks.

Hi: Liquidity position of banks is affected by banks frauds.

The Effect of Fraud on the Performance of the Banking Industry in Nigeria – Significant of Study

The finding of this study will be of great competence to the customers whose their funds were lost in the name of fraudster. The study will help the bankers to adhere strictly to their banking professional ethics and code of conduct. Again bank staff will use the benefit of the findings of the study to re-evaluate themselves and adopt appropriate measures and procedures of controlling or preventing bank fraud.

It will also assist the Central Bank of Nigeria (C.B.N) to know when these are distress symptoms and to form measures to further securitize the banking system and restore depositor’s confidence. This will enable the government to take drastic measures on whoever defaults. It is hopes that the finding of this study will help the customers and investors to know whether the banking system is safe and sound.

Furthermore, the result of this study as expected would influence the introduction of professional bankers to head strategic position in order not to experience the distress bank had in the late. 1990s. The study will assist depositors in making decision whether to visit such banks with fraudulent act again.

This study will benefit all Nigerian stock exchange (NSE) in the sense that transactions more so, it will make individual and corporate bodies to be cautious in their dealing in banking industry or performance

The Effect of Fraud on the Performance of the Banking Industry in Nigeria – Limitations and Delimitations of Study

The truth remains that finances one has is not enough to finance this research work, the time available is not enough to go for further research, even date are not adequate enough to process this research;

Similarly, the unwillingness of the respondents to take the necessary pains in completing the questionnaire also hindered the progress of this work. Other academic problems like lack of relevant textbooks for the study were also a set back.

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Due to the difficulties in performance and low volume of transactions obtained at the branch of the bank, our study should be limited to activities of the Abakaliki branch.

The Effect of Fraud on the Performance of the Banking Industry in Nigeria – Definition of Terms

  •            Bank Failure: The collapse (Liquidation) of a bank due to inability to meet deposition obligation or technical bank eligibility standard prescribed by the central bank.
  •      Bank Fraud: This can be defined as an act of or course of deception of trickery deliberately practiced in order to gain some advantage dishonestly.
  •          Corruption: Refers to acts of dishonest or wicked behavior.
  •           Fiddle: Means falsification of attempts or guilty of fraud.
  •          Liquidity: This refers to firm’s cash and marketable security positions and its ability to meet maturing obligations.
  •        Laundering: Moving (money which has been obtained illegally) through banks to make it seems to have been legally obtained.

—-This article is not complete———–This article is not complete————

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  1. I like your farmat do you have other project topic like FRAUD CONTROL SYSTEM AND BUSINESS GROWTH IN BANK


      pls i need material on the impact of frauds on profitability of banks with case study of skye bank plc or related onces

  2. okoh john says

    It is really interest me when I read through ur article .this is d bases of fraud in nigeria banking which need immediate solution before it goes beyond hand. Keep it up nice of you

  3. lebari naasi says

    do u hv any topic on economic implication of bank fraud and forgeries wit a case study of any bank?

  4. available job in says

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  5. Egbe Gregory says

    Keep it on, it is really interest me when i go through your you have any other topic like, the gains and pains of E-banking a case of first bank.

  6. omar paruoq yar'adua says

    thank’s for ur guide please do you have a project like study of froud in commercial banks in nigeria

  7. adeoye janet says

    I need materials on this topic ” impact of information technology in the performance of banking industry” (case study First bank) as soon as possible thanks



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