means an act of dishonesty, deceit and imposture. According to Kirk Patrick
, a person who pretends to the something he is not is a Fraud, deceptive
trick, Cheat and a swindle. By extension, Fraud include embezzlement, theft or
an attempt to unlawful other, misuse or harm the assets of the bank [Bank
Administration institute, 1989] Fraud can be committed by employees, customers
or other operator independently or in conjunction with others inside or outside
research work is centered on prevention control and Effect the Nigeria Economy
[A case study of First Bank Nigeria Plc]. This work consists of five chapters.
The First chapter is the introduction and general description, objection and
significant of study, problem and justification of research, historical
background of business, major hypothesis, scope and limitation of the study.
second chapter involve the review of relevant past knowledge on the topic under
the heading ‘’literature Review’’ Here several textbooks, journals, academic
discussions by notable feature, were referenced.
chapter three is Research Methodology and chapter four is the analysis and
interpretation of date and testing hypothesis.
chapter four also emphasize basically on past presentation, analysis and
discussion of findings.
chapter five is the end of the chapter which emphasis on project, summary,
recommendation with be drawn as to highlighted, conclusion shall be drawn as to
whether fraud has effect on the Nigeria economy or not. To sum it up,
recommendation shall be made for future works.
of contents vi
Background of the Study 3
Statement of the Problems 5
Objective of the Study 5
Significance of the Study 5
Scope of the Study 6
Limitation of the study 6
Background of the Fist Bank Plc 7
Definition of Terms 9
CHAPTER TWO: Literature Review
Historical Background 11
Model Specification 12
Literature Review 13
Theoretical framework and Empirical
Nature and Analysis of Fraud and
of Fraud 22
2.6 Types of Fraud 29
2.7 Ways of Defrauding Banks
2.8 Measurers for controlling and preventing
First Bank 41
2.9 Summary of the Chapter 50
CHAPTER THREE: Research
Re-Statement of Research Questions and
Research Design 54
Sampling Design and Procedure 54
Data Collection Instrument 55
Procedure for processing and Analyzing
collected data 55
Limitation of the Methodology 56
CHAPTER FOUR: Presentation and Analysis
Opinion concerning research question 63
CHAPTER FIVE: Summary, Conclusion
Historically, there are records to
show that indirectly, banking activities started in Nigeria
about 1861 when shipping company ELDER DEMSTER LINE started objective of making
easier transaction with the company’s customers in Nigeria.
In 1892 African Banking Corporation
(ABC) was established as the first banking institution which was initiated by
the chairman of ELDER DEMSTER.
It open its first branch in Lagos in 1892, by 1975,
there were seventeen banks operating. Before 1892, Nigeria
was evidently underdeveloped economically, even in 1975 despite the growth in
number of banks Nigeria
is still developing, it is true, however that the number of bank should not be the only major aspect of development
that would relate to economic growth. So
many other factors are determined with the various resources endowment, labour supply
and of course capital.
An economy that is blessed with many
resources and valuable agriculture crops and suitable land – water mix, is in a
better position to develop than another economy without these. In the same
vein, a country that does not have adequate supply of requisite manpower is at
Suffice to say, that for the purpose
of this study, emphasis will be based on of banking sector as the only major
aspect of economic growth that would relate to economic development of a
The banking sector consist the pillar
on which the economy of any nation can
financial service is one of the main point of which economy
The unique roles of banks can be
attributed among other things to the importance of money in scheme of things as
it perform a fundamental role in shaping the economic destiny of the country Nigeria.
Bank support local economic by
mobilizing funds from the surplus sector to deficit sector; by serving the
credit needs of the communities and provide a safe for the cash balance of
individuals, businesses and government.
The institution itself has witness a
tremendous growth from a few indigenous banks in the 50’s to one hundred in the
90’s. There had been great
diversification in the banking industry as most Merchant Banks now have license
to practices universal banking.
It is widely recognized that the
responsibility of banks are multifarious and sometime conflicting as interest
of many parties regarding the activities of banks of variance. Depositors expect maximum liquidity and highest
return for their deposit, borrower want deep money and shareholder expect
maximum profitability. The government
regulatory authorities are interesting in prudency and safe operation so as to
systematic stability because the failure of single bank will have more micro
and macro impact on the institution in other industries as a result banks
should synchronize these conflicting interest
and they cannot afford to fail.
Infact, some banks failed even before
they open for business, what kept many
bank up for the period of 3-5 year is that they lasted their
ability to deceived the banking public
and hoodwink The Central Bank of Nigeria.
In order to minimize, it is not
eradicate, the incidence of fraud in banks, the federal government of Nigeria
had promulgate the advance fee fraud and other offences decree in 1995 whereby a
failed bank tribunal was set up to prosecute offenders as regards financial
malpractices within the banking sector.
BACKGROUND OF THE STUDY
The principal aspect of a bank’s
business must consist of receiving money for the credit of current account,
which the depositor could withdraw on demand by cheques before we can conclude
that an institution is regarded as a bank.
Banking industry is dynamic and
diverse among all sector of the economic and it plays a significant role in
economy growth and development.
Fraud in banks is not a new problem,
it is infact as old as the origination of bank.
Fraud has been in the economy before the advent of bank, infact fraud is
a canker worm that is eating deep into bank administration in Nigeria. It happen
in different level of economy i.e the government sector, educational
sector, transportation sector etc.
Fraud in the entire economy has
continue to increase over the years as no major steps has been taken to
eliminate this problem.
Fraud is define as “the cut of
depriving the resources or fund or asset of a bank or a person to non-viable
project of personal use”. It occurs at
all levels of management in banks.
This problem varies from management,
managers, to the officers, bank inspectors, clerks, cashiers, and supervisors
etc. sometime, it occur between two
department in a bank. When fraud occur
in a bank on a continual basis, banks become unable to meet their daily
financial obligation and when this occur frequently the banks are force to
declare themselves distressed.
Many banks have lost a great
percentage of their assets, customer deposit, profit and caring to fraud. The problems of fraud in banks have discouraged and scared foreign investors away from investing and has
led to capital flight since investors are looking for places where they can get high return on their investment.
According to section 39 and 40 of
the NDIC Decree No 22 of 1988 mandate
insured banks in Nigeria to render to the
corporation return on fraud, forgeries or outright theft occurring in
their organization and report any staff
dismissed, terminated or advice to retire on the ground of fraud
practices. Record have shown that only
few banks render returns on fraud and other related malpractices, even when
such cases exist at the time of
rendering their statutory return to the regulatory authorities.
Therefore, the problem of fraud needs
to be thoroughly analyzed in order to encourage the growth and development of
the banking sector because whatever happens to the banking sector will
definitively affect the general economy.
The level of fraud in Nigeria banks
today assume an endemic dimension as government official and their cohorts are
now leading the most corrupt country in the world recently. In order to be able to progress remedies
for dominating fraud in bank, it is useful to identify the commonest cause of
bank fraud and this will lead to the provision of control measures which
surfaces as the research progress.
STATEMENT OF THE PROBLEM
The sub-optimal performance of the Nigeria banking
industry is due to an array of problem of these problems, the issue of fraud in
our banks is one bank is most untreatable and monumental. The magnitude of this problem and its
implication for the industry has inspired this research of fraud in banks.
There is a clear relationship between
bank fraud and level of customer’s confidence as previous study on bank fraud
clearly shown, it means that customers have tendency to base their choice and
patronage of banks on the extent to which the bank is free of fraudulent
If a bank financial health is in
doubt, investors and depositors will not like to invest their funds in such
banks, this has raised the question how can investors and depositor evaluate
the performance of banks?
OBJECTIVES OF THE STUDY
The basic objectives of this study
determine the effect of fraud or the consequence of fraud in Nigeria Banking
find out how fraud penetrated into banks and how it can be detected
encourage the eradication of fraud in our financial institution.
objective is to win or retain the confidence of all investors.
minimize the incidence of fraud in Nigeria economy.
deduced from grave implications for the banks and economy as a whole of the
rising wave of bank fraud which need adequate attention.
SIGNIFICANCE OF THE STUDY
The significance of this study is
that this work will be beneficial to investors, shareholders and other interest
members of the public as they will be able to know the extent of controlling
and preventing of fraud that existing in their company.
The significance of this study to
banking industry and society at large cannot be over emphasized at least to
probe into causes, effects and solutions to the incessant fraud practices in
SCOPE OF THE STUDY
For the purpose of this study the way
of preventing and controlling fraud in first bank Nigeria plc.
As well as the effects on the Nigeria economy
will be focal point of this study. All
also the actual amount involved and actual or expected loss in bank fraud be
multiples of the reported figures as many banks had reneged in rendering their
required returns on frauds.
LIMITATIONS OF THE STUDY
This study is limited due to the time
factors i.e availability of little time set aside by the management of
university authority. The un-cooperative
attitude of the staff of first bank of Nigeria and other sources of data. As regards to the flow of information also
hinder the researcher in the course of this study.
The following hypothesis will be in
fraud in bank has effect on the Nigeria
H1: The fraud in bank does not have effect on the
H2: The incidence of fraud in bank cannot be
reduced in Nigeria
H3: The fraud in bank does not have effect on
BACKGROUND OF THE FIRST BANK PLC
First bank plc of Nigeria is a leading institution in Nigeria with
over a hundred years of banking experience, industry and resilience behind
It was established and distinguished
itself as a leading and major contribution or contributor to the economy
advancement and development of Nigeria.
It is the oldest bank in Nigeria, which was founded in 1894 by a shipping
magnate from Liverpool, Sir Alfred Jones
the bank commence as a small operation in the office of ELDER DEMSTER
and company on March 31, 1894 with head office in Liverpool. “Bank of British West African (BBWA)”
The bank has metamorphosed from bank
of British West Africa (BBWA) in 1957 to standard Bank of Nigeria Western
African Ltd. Over the years, experience
the bank has a phenomental growth with a share capital of N55.6 million in 1980,
the bank share capital growths to N1016 million as at 2002.
First Bank Plc has remained a leading
banking in Nigeria
with a total asset base over N409.1 billion and posted a profit after tax of
over N14.4 billion as at March 2003. The
bank has branch network of over 500 branches spread throughout the federation
as at 2008, May. Which majorities are
on-line; this is done to satisfy the need to their customer.
First Bank Plc has diversified into
wide range of banking activities and service, this include corporate and retail
banking, registrarship, trusteeship and insurance brokerage, especially
electronic banking system. Over the
years, the banks experienced several restructuring initiatives, reposition and
to take advantage of opportunities in the changing environment.
In 1957, it change its name from Bank
of British West African to Bank of West Africa.
In 1969, there was incorporated
locally as the standard bank of Nigeria
limited in line with the companies’ decree of 1968. Changes in the name of the bank also occurred
in 1991, to First Bank of Nigeria Limited and First Bank of Nigeria Plc
In 1985, the bank introduced a
decentralized structure with five regional administrations. This was configured in 1992 to enhance the
banks operational. In 1996, the bank
introduced the First Bank of Nigeria Century II project to revolutionize its
operations in line with the dynamics of the environment.
First Bank of Nigeria got listed on
the Nigeria Stock Exchange (NSE) in
March 1971 and has won various Nigeria
Stock Exchange (NSE) president’s merit award over 10 times ahead of its
emergence in 2004 as the leader in Nigeria.
The bank on October 4, 2004 received
two award, namely the “Best Foreign Exchange Bank in Nigeria” and the “Best Emerging Market bank in Nigeria”,
at the 2004 Annual General Meeting at International Monetary Fund (IMF) and the
World Bank in Washington D.C.
According to global finance,
organizer the Washington D.C event, First Bank in a competitive selective
process that involved over 15,000
organization in 70 countries of the
First bank also have representative
office in South Africa and a
leader in financing long-term development of the economy which was demonstrated
in 1947, when the first long-term loan was advanced to the colonial government,
to demonstrate the commitment to his customers and Nigeria economy, especially loan
and advances, asset size, branches and deposit growth based.
Furthermore, its bank track record of
profitability and reliability in sound banking, has continually placed the bank
in its leadership position.
In line with the mission statement
Remain True to our Name by Providing the Financial Service possible”, the bank
will consistently transform itself as it forges ahead in it second century of
providing qualitative banking serves.
DEFINITION OF TERMS
Fraud: Deceit or trickery
deliberately practices in order to gain some advantages, dishonesty over other
perpetrators: Means fraudulent parties or the fraudster’s capital flight: is
the different between total private capital outflows and the part for which
interest income is identified and reported.
Hoodwink: Mean deceive to bad luck
Dent: Hollow left by a blow or
Endemic: Commonly found in a specified people or