Causes Of Fraud In The Nigeria Banking Industry (A Case Study Of Fin Bank Plc Onitsha And Owerri)

Project and Seminar material for Banking and Finance

Project and Seminar material for Banking and Finance


This research project concentrates on the causes of frauds in the Nigeria banking industry. It was intended to reveal the factors that are responsible for the numerous fraud incidences widely noticed in the Nigerian banking industry.
To achieve the above objective many research questions were asked, such as;

  1. Does lack of banking expertise results in fraud?
  2. Does weak and inadequate supervision lead to
    Commission of frauds?
  3. Does the get-rich-quick attitude of Nigerians spur them
    to commit fraud in the banks?

To find answers to the above questions 150 questionnaires forms were distributed among the respondents, out of which 125 were retrieved and the data collected were analyzed which charts, and percentages.

From the analyzed data and following were found;

  1. That lack of adequate and proper supervision of Banking staff and banking operation can result in Frauds in the banking system.
  2. That lack of banking expertise on the part of the bank employees makes the banks prone to frauds.
  3. That the get-rich-quick attitude of the Nigeria people spurs them to commit frauds in the banks.

Table Of Content

Preliminary Page(s)

  • Title page
  • Approval page
  • Dedication
  • Acknowledgement-
  • Abstract of content

Chapter One

1.0 Introduction

  • 1.1 General Overview of the Study
  • 1.2 Statement of the problems
  • 1.3 Objective of the study
  • 1.4 Research Questions
  • 1.5 Significance of Study
  • 1.6 Limitation of study
  • 1.7 Definition of terms

Chapter Two

2.0 Literature Review

  • 2.1 Evolution of commercial Banking in Nigeria
  • 2.2 Functions of Banking Industry in Nigerian Economy
  • 2.3 Fraud in Nigerian banking Industry
  • 2.4 Types of Fraud in Nigeria Banking Industry
  • 2.5 Causes of fraud in Nigeria Banking Industry
  • 2.6 Consequences of Frauds on Banks
  • 2.7 Measures for controlling Bank frauds

Chapter Three

3.0 Research Methodology

  • 3.1 Research design
  • 3.2 Sources of data
  • 3.3 Sample Design
  • 3.4 Method of data collection
  • 3.5 Procedure for data collection
  • 3.6 Reliability of the measuring instrument
  • 3.7 Technique for Data Analysis

Chapter Four

4.0 Presentation and Analysis of Data

  • 4.1 Presentation of data
  • 4.2 Analysis of data
  • 4.4 Analyses of the research questions.

Chapter Five

5.0 Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • Bibliography
  • Appendix
  • Questionnaire

Chapter One

1.0 Introduction

1.1 General Overview Of The Study.

The Nigerian banking Industry is fraught with fraudulent practices. Almost every bank has experienced one form of fraud or the other.

According to Onuigbo (1986:53) for any bank to succeed in Nigeria, It must first of all devise a means of forestalling frauds both within and outside the bank.

Those frauds take different forms. They may be misappropriation or outright stealing of the banks frauds or other assets. But our concern is on the causes of these frauds. The researcher intends to determine what is responsible for this wide-spread fraud in the bank.

This research project therefore focuses on the cause of frauds. Why many frauds are committed without being defected and prevented at the early stage and to find out those responsible for perpetrating them.
This research project is necessary especially now that the Federal Government has come out to apprehend the fraudsters in the banking Industry and prosecuting most of them. It is therefore the position of this research to reveal the causes of these frauds so as to prevent future occurrence of such large-scale frauds in banks.

1.2 Statement Of The Problems.

The Nigerian banking industry has come a long way and has been flooded with so many banks at different times. With the exception of a negligible number of those banks, those banks, those banks have always disappeared no sooner than they are established. The result is that new banks have always cropped up in the banking industry.

According to Uzomah (1987:18) Fraud and corruption are principally responsible for the high rate of banks death in the Nigerian banking industry”.

Having pinpointed fraud and corruption as the factors responsible for the failure of most banks in Nigeria, we are faced with the task of finding out what is, in turn responsible for the fraud in our banks.

1.3 Objectives Of Study

The Nigerian economy was visible distressed by fraud. Frauds are among the known economic crimes now plaguing financial systems. However, the banking systems operations are mostly the conduct pipes through which the fund from the economy are transferred and or received through various fraudulent and forgery activities which according to CBN (2001) include;

Electronic frauds occur through manipulation, fraudulent encashment of negotiable instruments, and misapplication of lending proceeds and opening of letters of credit without proper documentation.

To determine the factors that fans the members of fraud in our financial system and the society at large is therefore the purpose or objective of this study including:

  1. To analyze the general direction in which fraud is changing within the period covered in this study.
  2. To analyze the empirical evidence of fraud with a view to investigate its influence on the Nigerian banking industry.
  3. To analyze the consequence of fraud in the bank.
  4. To analyze the impact of fraud on the bank overall economic growth.

1.4 Scope Of The Study

The scope covered the areas that deal with the failed banks based on; fraudulent practices. Therefore, this study will be limited to some selected failed banks in Nigerian banking sector.

The selected failed banks are:

  1. Hallmark Bank Ltd.
  2. All States Trust Bank Ltd

1.5 Research Questions

  1. What are the causes of fraud in the banking
  2. What are the effects of frauds on the Banks?
  3. What are the consequences of fraud on banks?
  4. Does poor management cause of Fraud?

1.6 Significance Of The Study

The importance of this research work which could benefit both an individual reader and an institution can not be over emphasized. The world is continuously changing, thus, a research work like this would expose the readers mind.

The research is significant because, it will serve as a reference source for subsequent researchers on the issue involved. This piece of work will benefit the entire country because when banks fail due to large frauds the employees will lose their job and the entire economy suffers. The study will add to the volume of academic researches in existence.

1.7 Limitation Of Study

As a result of the present situation of things in Nigeria and also the cost of living prevalent in it, I was unable to carry out a comprehensive research. For this reason, some various areas of study could not be reached as the cost of transportation and other logistic-support could not be achieved and met.

Another problem I encountered was the unavailability of materials, as I had to travel to other parts of the state.
Another limitation I encountered, was time, time was another responsible key factor as I had to combine my studies as in taking lectures and going out for research work at the same time to enable me improve.

1.8 Definition Of Terms.


This is describes as a place where the business of acceptance of deposits from customers are being done. The transfer of these deposit from one account to another or their withdrawal in the form of notes, coins and the lending of money by way of loan or overdraft to customers are carried out.

Collateral Security:

This is any property that is pledge as security for the repayment of loan.


This is a term for the excess of bank account withdrawn by a current account customer of bank.


This means to acquire something by fraud. That is to trick somebody out of what is rightly his.


This term refers to lack of care and precaution in the performance of fiduciary duty.


This is the illegal taking of funds belonging to bank customers.


This term is used for the misuse of funds belonging to stockholders such as interest, incomes, fees, and commissions or through the use of fundamental expense vouchers.

Chapter Five

5.0 Summary, Conclusion & Recommendation.

5.1 Summary

Lac of adequate supervision leads to frauds in banks, loose and insufficient supervision of workers give rise to a veritable ground for frauds in the banks while adequate supervision can serve as a check on commission of frauds.

The get-rich-quick attitude to many Nigerians drives them into the commission of frauds in the banks. The thing is that everybody wants to become rich as soon as he can. This tendency drives a lot of people into committing frauds.
Improper planning of bank operation may also leads frauds. Bank workers should be rotated after a fixed time period. This ensures that no workers stay in one position. Long as to devise means of penetrating frauds.

Overload of work for staff can equally lead to fraud the banks. When on bank staff is overloaded with work much that he can perfect a crime without collaborating with someone else, it leads to commission of frauds.

Improper internal control system makes it possible for fraud to be committed without being detected easily immediately. When bank rules and procedures are strictly followed, it gives rise to frauds.

Furthermore, a weak internal check makes the banks prone to frauds.

5.2 Conclusion

Based on the analyzed data of the research project, the following conclusions could be made.

  1. Lack of banking expertise can result in bank frauds needs the activities of expertise forestall frauds.
  2. Weak and inadequate supervision leads to commission of frauds.
  3. The get rich quick attitude of Nigerians spurs them commit frauds in the banks .The truth is that everybody wants to get rich quick therefore, where there are no just ways of doing it, they resort frauds.
  4. Bank board members, manager, supervisors and cashier are the groups of people mostly involved in bank frauds.
  5. Lastly, insufficient internal check system makes banks susceptible to frauds.

5.3 Recommendation

The following recommendations are in tented improve the efforts of the banks and the government reducing frauds in the banks.

  1. All banks staff who commits frauds should prosecuted. This will serve as deter to others.
  2. Banks to protect the assets of the banks whether cheque or note should install more security measures. This help to reduce the rate of frauds in banks.
  3. Bank internal control systems should be reviewed periodically to rectify arrears where deviations has occurred in the system are closed up as soon as they noticed.
  4. The government and the banking industry should up campaigns to educate the Nigerian masses on benefits of banking services and the types of services available. This campaign will help to nurture bank habit in the people. It will help to make people aware of the operations of the banks. This awareness will help to forestall frauds in the banks because the people will be aware that if they commit frauds, they will be caught eventually.
  5. Ban staff should be rotated periodically this will mean that no staff stays so long in one position. When staff are rotated they seem to look new in their new duty posts and therefore cannot easily plan and committee frauds.
  6. Furthermore, an effective means of supervision should be installed to ensure that the activities of bank employees are constantly monitored.

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