Abstract
This study examines the
impact of frauds and forgeries on the banking industry in Nigeria. One of the
major characteristics a bank must possess is that its customers must be able to
have unflinching and undoubted confidence in the banking the banking system,
but due to the act of fraud and forgeries, this confidence has been reduced to
the barest level, this does not affect the banking sector alone, but the
long-term effect in on economy as good banking system helps to promote economic
development. The primary source of data collection was used for this study. The
simple random sampling was used to select 50 firms which serve as the sample
size of the study. The chi-square statistical tool was used to test the stated
hypotheses. The findings revealed that frauds and forgeries in the banking
sector have negative impact and implication on the banking system and other
sectors of the economy which make up the entire system. It was also concluded
that the total loan portfolio of the banking industry affects the deposits base
of the industry as performing credit facility will
have a positive impact on the deposit base because loan payment will increase
the deposit base and interest on such loan will be realized immediately. It was
also recommended that there is the need for members of the public to shun the
habit of cultivating corrupt practice as part of our lives.
TABLE OF CONTENTS
Title
Page i
Certification
ii
Dedication
iii
Acknowledgements
iv
Abstract
v
Chapter One:
Introduction 1
1.1
Background to the Study 1
1.2
Statement of Problem 4
1.3
Research Questions 5
1.4
Objective of the Study 5
1.5
Statement of Hypothesis(es) 5
1.6
Significance of the Study 6
1.7
Scope of the Study 7
1.8
Limitations of the Study 7
Chapter
Two: Review of Related
Literature 8
2.1 Introduction
8
2.2 Types of Fraud
11
2.3 Causes of Fraud 13
2.4 Consequences
of Bank Fraud 17
2.5 Frauds in
the Nigeria Banking Industry 23
2.6 Review of
Past Work 26
2.7 Effect of
Fraud and Malpractice on Banks 29
2.8 Strategies
for Preventing Fraud 30
Chapter
Three: Research Method and Design 36
3.1
Introduction 36
3.2
Research Design 36
3.3
Description of Population of the Study 36
3.4
Sample Size 37
3.5
Sampling Techniques 37
3.6
Sources of Data Collection 38
3.7
Method of Data Presentation 38
3.8
Method of Data Analysis 38
Chapter
Four: Data Presentation, Analysis and Interpretation 40
4.1 Introduction 40
4.2 Data Presentation 40
4.3 Data Analysis 40
4.4 Hypothesis Testing 50
Chapter
Five: Summary of Findings, Conclusion and Recommendations 55
5.1
Introduction 55
5.2 Summary of Findings 55
5.3
Conclusion 55
5.4
Recomm\endations 57
References
59
Appendix
I 61
Appendix
II 62
CHAPTER ONE
INTRODUCTION
1.1
Background to the Study
Banks
all over the world have through their unique position in the economy
contributed immensely to economic growth and development of nations, hence the
banking sector in any country plays fundamental role in increasing the level of
economic activity.
A
bank is any person, partnership, or company that provide the minimum banking
services and which is licensed by the federal government as a banking
institution. Such minimum banking services includes acceptance of deposit from
the general public making payment to depositors on demands to the extent of the
money available in their accounts: granting loan and advances to credit, worthy
customers be involved in the clearing of cheques, etc.
Any
problem that tend to hinder their smooth operation such as fraudulent practices
is often viewed with seriousness for long, Nigeria financial system has
suffered from fraudulent practiced perpetrated by banks as a corporate body.
Fraud
is any activity that amounts to unfair dealings, he also described forgery as
any acting that led to frauds where as forgery itself is an act in which a
person knowingly makes a false document or writing with the intent that it may
in any way be used or acted upon as genuine, be induced to do or restrain from
doing any act whether Nigeria or else where, also in the same vein, Osamwonyi
(1998) defined fraud as any activity or deception practiced to cheat, deceived,
or circumvent another to his injury.
Thus,
the definition of fraud varies widely in nature, but can be summarized as the
misappropriation, misrepresentation and manipulation of firms or persons facts
and figures, for personal gains. Any acts of unfair dealing, weather against
the bank by its customers or against the customer by the bank (including the
officials) or against the bank by its officers are regarded as a fraud.
The
effect of fraud on the banking system is sometimes very damaging, it leads to
loss of money which obviously reduces the profit base of the industry. It also
leads to loss of confidence in the banking sector by its shareholder as it
might affect their dividend. Fraud is regarded as a leakage in the system. Bank
fraud affects banks staffs by way of dismissals, termination or suspension. Therefore,
fraud and fraudulent practices in banking industry of any nation retard
economic progress. Efforts have being made by governments, institution and
various agencies to reduce the widespread of these frauds.
The
Nigeria government, for example in 1994 promulgated and ordered. The failed
bank tribunal to try frauds and officers of bank connected with contributing
towards failed banks. Institutions have also tightened loopholes and
recommendation and applied tough measures including internal controls system,
compliance with producer for the opening of new accounts and transfer, meticulous
examination in hiring and recruiting personal of banks, proper inspection of
books and remunerating workers are recommendations that would help to reduce
frauds In the banking industry.
1.2 Statement of Problem
This
study is concerned with finding out the impact of fraud on the banking industry
in Nigeria. Distressed banks Nigeria today have suffered a great deal of frauds
and the abuse of credit facilities by insides. The extent of frauds in banks
rather than abate, has continued to escalate. Since 1970s banks been
maintaining a commendable growth but regrettably, our financial system has been
saddled with myriads of problem one of these is the intractable fraud that has
bedeviled the system. The magnitude of this problem and its impact on the
banking industry has inspired this research on fraud in Nigeria’s banking
industry.
The
non – profitability in some of our banks is partly as a result of frequent
fraud incidents. The liquidation of 31 banks in May 2003 by the regulatory
authorities that is, Central Bank of Nigeria (CBN) and the Nigeria Deposit
Insurance Corporation (NDIC) can be largely attributed to frauds. This study
therefore seeks to evaluate the effects of fraud in bank profitability and
survival.
1.3 Research
Questions
The
following questions will guide the conduct:
1. To what
extent does
bank fraud affect the performance of the banking industry in Nigeria?
2. To
what extent does weak internal control contribute to bank fraud?
3. To what
extent do forgeries affect shareholders’ decision in the Nigerian banking
sector?
1.4
Objectives of the Study
The
primary objectives of the study are:
1. To
examine how bank fraud affect the performance of the
banking industry in Nigeria.
2. To
ascertain to what extent weak internal control contribute to bank fraud.
3. To
ascertain how forgeries affect shareholders’ decision in the Nigerian banking
sector.
1.5 Research Hypotheses
Hypothesis One
Bank fraud does not affect
the performance of the banking industry in Nigeria.
Hypothesis
Two
Weak
internal control does not significantly contribute to bank fraud.
Hypothesis
Three
Forgeries do not significantly affect shareholders’ decision in the
Nigerian banking sector.
1.6
Significance of the Study
The
nature of this study involves the use of second data. Further more, an
econometric model will specified to examine the impact of fraud on the banking
industry in Nigeria between 2010 and 2015.
The
academic study on frauds in the banking industry in Nigeria will be useful to
several groups of scholars, students, government and the general public.
Student
of banking and finance, economics, accounting and management etc shall make use
of this work as a valuable research work. Secondly it shall enable the readers,
financial institution, non-banks financial institution, financial analyst and
the government to understand the causes of fraud and its impact on the banking
industry in Nigeria.
The research work therefore is designed
to help the general public get acquainted with various frauds and their method
of execution with the view of gaining sufficient knowledge to enrich
individuals and collective experience in management and prevention of
fraud.
1.7
Scope of the Study
This study examines the impact of frauds and
forgeries on the banking industry in Nigeria. It covered the time period of
five (5) years (2010 – 2015). For this study, the researcher used a sample of 50
for effective survey with special reference to Benin Metropolis.
1.8 Limitations of the Study
In
the light of these limitations, obstacles are bound to be encountered in carrying
out this type of research.
More
disturbing was the un-corporative attitude of bankers who where not always
willing to release data on fraud as it affect their irrespective banks: this is
because public perception of the corporate image of the bank will be adversely
affected hence the need to withhold information on frauds.
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