The Effects Of Bank Fraud In The Nigerian Economic Development (21st Century Experience)

Project and Seminar Material for Criminology And Security Studies

The Effects Of Bank Fraud In The Nigerian Economic Development (21st Century Experience)


Fraud is gradually becoming rampant and a daily occurrence in our banking industry, while the bank management are busy working out means of detecting, checking fraud, the fraudsters on the other end are busy designing new method of circumventing those measures in conjunction with some dishonest bank staff. It should be pointed out that effect destabilizes banks not only that, hinders growth of banks and attaining their aims and objectives or goal. Hence we have good numbers of banks that were distress, acquired by other banks and merged with other banks in the country in the present 21st century. The menace ranges from falsification of entries, forgery of signature of account holders, spurious letter of credit, cash theft by bank cashiers, telex fraud, collusion in issuance of loans, manipulation of financial data, misrepresentation of automated teller machine (ATM), to mention but a few. The objectives of this research work therefore to carry out survey and investigation on the major causes of fraud and their effect on the Nigeria economy with reference to Ecobank plc, union bank plc, Skye bank plc, keystone bank plc, stanbic IBTC and united bank for Africa plc (UBA).The project also evaluated various forms of fraud and malpractice that can be in existence, relating to this project in examining the problems, the researcher used both primary and secondary data. In conclusion, the researcher believes that this study has somehow achieved its predetermined aims and objectives by identifying various ways by which frauds and malpractice and possible ways of preventing them. Finally, this report is primary a prelude to the student undertaking similar work in related discipline as the writer due to the constraints encounter could not go beyond this scope. This project finally worked out ways of preventing or reducing the above problems.

Chapter One


1.1 Background to the Study

The concept fraud is a term known in all works and cranny in Nigeria. Fraud has eating deep into the fabrics of Nigerian society, mostly in this present 21st Century. The only remedy to this ugly situation will be self discipline and honesty among bank staff, otherwise this decadence will persist. What is fraud? Some well read individual have tried to bring the subject home in a better language for easy understanding. Okorie (2000). Defined fraud in his book “Understanding Practical Auditing and Investigation,” as irregularities involving the use of criminal deception to obtain unjust or illegal advantage.

The word irregularity is used to refer to intentional distortion of financial statements for whatever purpose and misappropriation of Assets. Donnel (2001) argued that “fraud in the contemplation of Civil Court of Justice, may be said to include all act of omission and concealment, justify reposed and are injurious to another by which undue or unconscientiously is taken of another”. Microfinance bank certification programme study manual (2012) define fraud as a deception deliberately practiced in order to secure unfair or unlawful gain. Adewumi (2011) described fraud as a “conscious premeditated action of person or group of person with the intention of selfish or personal monetary gain”. It involves the use of deceit and trick and sometimes highly intelligent canning, and known how.

The action usually takes the form of foregoing falsification of documents, outright theft. Fraud in its entering whereby another is sought to be deprived by illegal or inequitable means what he is entitled to Donnel (2001). The above definition may not enough to express what fraud is to the reader, but can at least give a vivid definition of the term because it contains the fundamental of fraud which includes.

  1. There must be deceived through motive immaterial.
  2. There must be damage to the person deceived, Infact, where there is money, there is bound to be fraud. Harry (2000) opined that “No one is entirely immune to fraud. It crop up in small and large amount.

It is perpetrated by management both senior and junior employees whenever fraud is mentioned, one thinks of loss of money in financial institution like banks and insurance companies. In the 1960s, Banks and Insurance fraud are not tetched. The establishment of banks and more insurance companies concomitant at over stretched of staff resources and accordingly, the weakness in the system the result of these is the speed at which fraud in banking and insurance companies has risen.

Commercial fraud covers multitude of malpractice including such “with dollar crimes”, as obtaining credit without intending to pay, obtaining money in mart-order business without supplying the goods, obtaining money by promising to invest and not doing so, obtain by computer fraud insiders trading and tax fraud. “A Corporate Crime”. Where business people commit frauds against other invest or one tax authorities or where directors commit fraud against companies. Fraudsters involve themselves in fraudulent activities so as to be reckon with the society as those who have made it. The loss of funds assets through fraud reduces resources available for use in bank and insurance company operations. Considering the up-short the rate of frauds, hence the study of the effect control and possible solution to these special crime in bank.

1.2 Statement of the Problem

Banks has continued to witness increased number of fraud and malpractice with varying degree of sophistication. It was reported by the Nigeria Deposit Insurance Corporation (NDIC) that “Banking Industry has lost billions of naira to fraudulent activities, indicating a continuing increase in banking fraud” in the present 21st century in Nigeria.

This shows that while bank management are busy working out means of checking fraud and malpractice fraudsters on the other hand in conjunction with some dishonest bank staffs are designing new methods on how to circumvent those measures. It will then be pointed out here that the results or implication of these is damaging. Fraud and malpractice leads to unnecessary loss of huge amount of money. This loss of money by the bank cripples banks activities and transactions.

Again, every incidence of fraud reduces public confidence on bank; hence they question the credibility of the banking industry in protecting their money and meeting up with daily transactions. Banks fraud and malpractice delay or slow down the development of banking habits in Nigeria economy. People shy away from banks in fear of losing their money in case fraud occurs. Banks fraud and malpractice keeps the management of banks alert and cause them to waste resources and energies on fraud prevention and detection.

1.3 Objectives of the Study

The main aim of the study is to look out for the effect of bank fraud on Nigerian Economic Development.
In view of the aforementioned problems it becomes obvious that if nothing positive is done to check the incidence of fraud, it may lead to frequent bank liquidations in the Economy.

The main objectives of this research work therefore are as followed:

  1. To Carry out the survey and investigation of the major type of bank fraud and malpractice in Nigerian Economic development in 21st century using Ecobank as a case study.
  2. To determine the causes and the basic factors encouraging bank fraud and malpractice and examine the various forms and area of occurrence.
  3. To look into the possible effects or consequence of banks frauds and malpractice in the operation of banks in Nigerian Economic development in 21st century.
  4. To examine the various management and government devices geared towards eliminating or controlling financial fraud.
  5. To represent recommendations or solution that many help in reducing it noteliminated, bank fraud or malpractice in Nigerian Economic development in 21st century.

1.4 Research Questions

The investigation concerning this study will be based on the following questions.

  1. To what extent does fraud and malpractice affect banks earning?
  2. Does fraud and malpractice lead to loss of funds in the banking industry?
  3. To what extent do dishonesty bank staff, societal value and inadequate staff, training contribute to the existence of fraud or malpractice in the banking industry?

1.5 Research Hypothesis

According to Donnel and Orwell (2001) in a book American Encyclopedia Hypothesis is defined “as a preposition assured to be true merely for the purpose of argument or a preposition or theory put forward to account for an order of a body fact”.

To guide this research work and to accomplish the above outline objectives the following hypothesis will be subject to testing.

  1. H01: Fraud malpractices lead to /do not lead to unnecessary loss of fraud in the Banking Industry.
  2. H02: The occurrence of fraud and malpractice reduces/ do not reduce public confidence in banking industry.
  3. H03: Dishonest bank staff societal value and inadequate staff training are/are not major causes of fraud or malpractices.

1.6 Scope and Limitation of the Study

The main focus of this study is on the effect of fraud and malpractice on Nigerian banks with reference to Union Bank Plc, Eco bank Plc, and Skye bank. The staff of the banks, which includes top managers, middle managers, lowers managers and other staff in Asaba, Delta state. The study cannot be said to have covered all aspect of the topic under study and no single text, articles can pretend to have done so. Since the work is purely for academic purpose.

Staff Reluctance:

In most cases the staff of the used study often feels reluctance over providing required information required by the researcher. This result in finding information where the structured questionnaires could not point out.

Researcher’s Commitment:

The researcher, being of full time student spent most of her time on other academic activities such as test, class work, assignment, examination etc which takes average focus from this study.

Inadequate Materials:

Scarcity of material is also another hindrance. The researcher finds it difficult to long hands in several required material which could contribute immensely to the success of this research work.

1.7 Operational Definition of Terms


In law, fraud is deliberate deception to secure unfair or unlawful gain, or to deprive a victim of a legal right. Fraud itself can be a civil wrong (i.e., a fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compensation), a criminal wrong

Banking Sector:

The banking sector is the section of the economy devoted to the holding of financial assets for others, investing those financial assets as leverage to create more wealth, and the regulation of those activities by government agencies.

Financial Crime:

Financial crimes are crimes against property, involving the unlawful conversion of the ownership of property (belonging to one person) to one’s own personal use and benefit.


Is a federal republic in West Africa, bordering Benin in the west, Chad and Cameroon in the east, and Niger in the north. Its coast in the south lies on the Gulf of Guinea in the Atlantic Ocean.


The economy is defined as a social domain that emphasizes the practices, discourses, and material expressions associated with the production, use, and management of resources’.

1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study.
  • Chapter two highlight the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five

Summary Conclusion and Recommendation

5.1 Introduction

It is pertinent to note that this research was aimed at cross examine the effect of bank fraud in the Nigeria economic development”.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges associated with banks frauds in Nigeria economic development.

5.2 Summary

Lending remain at an all time low due to the risky business environment in Nigeria while this keeps driving high deposits in banks it has far reaching implication for the private sector showing that fewer and fewer private sector businesses were having access to bank loans or were probably interested in taking lines of credit from banks owing to the stringent conditions associated with accessing capital in commercial banks in Nigeria. Interest rates were having no effect on fraud occurrence reduction in the Nigeria banking sector this was as a result of the increase in interest rate due to the 2007 financial crisis, making the assertion that it was probably driving fraud occurrence through indirect causation to be likely true since it was preventing lending and increasing deposit gloat. Oversight regulation had no effect on fraud reduction showing that poor over sight function by regulatory bodies were still a problem responsible for high fraud occurrences in the Nigerian banking sector. Internal controls were also probably weak and having little or no effect on fraud reduction as a whole. Finally fighting fraud remains a hard task, high bank deposit accumulation by commercial banks should be viewed as a probable factor that can drive high fraud occurrences in Nigeria, the policy implication of this finding is that wage rates and lending to the private sector has strong.

5.3 Construction

The study sought to investigate the social impact of fraud on the Nigerian banking industry. Based on the results of the empirical analysis, banks in Nigeria are significantly thriving from, and may also be complicit in the high rate of fraud in the country. We also discovered a negative social impact of fraud on the Nigerian banking industry as a result of high rates of fraud characterizing the banking industry. Thus, the EFCC and other agencies responsible with the task of tracking fraud in Nigeria should earnestly beam their searchlights on banks in Nigeria, being possible conduit pipes for corrupt financial flows. Bank officials should be compelled to always act in accordance with existing laws and maintain high technical and ethical standards. Managements of banks in Nigeria should be made to look inward and rid their rank and file of thieves and other dubious persons possessing criminal instincts. Also, banks should be enjoined to take, and continue to take, a closer look at their own operations, declining to provide tolerant environments for fraud. Furthermore, issues relating to fraud in the industry should be reported to the EFCC and other related offences Commission. Failure to do so should be met with dire consequences; and CBN sanctions for indicted errant banks should extend beyond the status quo of merely slapping their wrists.

5.4 Recommendation

From the findings of this study, the following recommendations were made to improve the consequences of bank fraud on the growth of the Nigerian economy:

  1. The regulatory and supervisory bodies of banks in Nigeria need to improve their supervision using all tools at their disposal to appropriately check and curtain the incidence of fraud and fraudulent practices in the banking industry in Nigeria.
  2. Furthermore, training techniques should be upgraded to test honesty and integrity and not just technical skills. This should entail extensive training programme regularly done, as well as personality tests and IQ tests so as to understand the personality and character of the trainee. This would reduce negligence and carelessness in carrying out basic procedures that could pose as loopholes for fraud.
  3. A good internal organization should be put in place by banks. This will ensure that proper delegation exists, duties and job, are clearly divided and that jobs do not overlap. Similarly, staff members should not have unlimited access to sensitive machines and instruments like cheques, and official stamps. Data security should be ensured at all times. The bank however, should make it a point to take good care of their staff through fringe benefits and incentives Jobs at the bank should be constantly rotated, so that no staff stays in one position for too long.

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