1.       Background of the study        –           –           –           –           –           –           –           1

1.2       Statement of the Problem       –           –           –           –           –           –           –           2

1.3       Objectives of the study           –           –           –           –           –           –           –           4

1.4       Significance of the study        –           –           –           –           –           –           –           4

1.5       Research Hypotheses              –           –           –           –           –           –           –           5

1.6       Scope of the study      –           –           –           –           –           –           –           –           5

1.7       Organization of the Study      –           –           –           –           –           –           –           5

1.8       Definition of terms used in the study             –           –           –           –           –           –           6


2.1       Definition of Fraud     –           –           –           –           –           –           –           –           8

2.2       Theoretical Framework           –           –           –           –           –           –           –           9

2.3       Empirical Review        –           –           –           –           –           –           –           –           11


3.1       Research Design         –           –           –           –           –           –           –           –           14

3.2       Sources of Data          –           –           –           –           –           –           –           –           14

3.3       Method of data collection      –           –           –           –           –           –           –           14 3.4       Data Analysis –           –           –EXAMINE THE PLACE OF IMPORT THESIS IN AFRICAN POLITICAL THOUGHT



  1.       Background of the study

In recent years, the volume and frequency of fraudulent practices in Nigerian banks have been on the increase. According to the Nigeria Deposit Insurance Corporation (NDIC), the level of reported fraud in Nigerian banks rose from N804m in 1990 to N3,199m in 1998. Furthermore, the proportion of actual/expected loss to the amount involved in fraud rose from 3 per cent in 1990 to 22 per cent in 1998. Perhaps the highest fraud ever reported in any particular year by a Nigerian bank occurred in 1998 when United Bank for Africa plc wrote off N786m on account of fraud. The growing scope and scale of fraud in the Nigerian banking industry is not surprising, given the rising profile of the country as a corrupt and fraudulent nation.

The Nigerian Inter-Bank Settlement System (NIBSS) recorded that the banking industry lost the sum of N12.30 billion to various frauds between 2014 and 2017.

Fraud is a pandemic socio-economic disease, as it traverses both public and private sectors of the economy as well as developing and developed nations of the world.

Frauds occur in banks. Owolabi (2010) opines that bank frauds have far reaching consequences to the stakeholders and the nation’s economy at large. There has been large scale fraud in Nigerian banks which at various times, among other factors, have resulted in bank distress. A banking system that is in crisis cannot carry out its intermediation role effectively as there will be credit crunch in which case there is halt to new lending. There may be low capital adequacy ratio of the bank or short fall of liquidity. Owolabi (2010) traced most crises in banks over the world to fraud, which in some occasions, have resulted in bank failure. Bank fraud brings untold hardship to shareholders, employees, customers and family members when bank failures result from the act. Odi (2013) acknowledges that fraud in banks shakes the foundation and credibility of most banks in Nigeria, resulting to some of the banks being distressed. It is in recognition of these seemingly serious assertions on effect of fraud on banks that this study is designed to investigate the impact of fraud on the performance of commercial banks in Nigeria.  

1.2       Statement of the Problem

Fraud is a universal problem as no nation is free from it; though developing countries and their various states suffer it more. The corrupt and fraudulent events witnessed daily across the nation have continued to betray every good intention and selfless effort made by true patriotic Nigerians toward restoring economic glory of Nigeria as was in the 80’s when the United States Dollar had unreserved respect for the Naira in the international market (Okoye, 2016). The incidences and magnitude of fraud are increasing (Okoye&Gbegi, 2013). The above view was collaborated by Modugu and Anyaduba (2013), Gbegi and Adebisi (2014), and Okoye and Akamobi (2009). Imoniana, Antunes and Formigoni (2013) did not only acknowledge the endemic and escalating nature of fraud but re-echoed the description by KPMG (2009) that described fraud as an industry not just for fraudsters; academics study it, Investigators investigate it, lawyers litigate on it, and conference goers debate on it. However, the industry is built on managing the consequences of fraud rather than on preventing fraud.

Owolabi (2010) disclosed that Dictionary of Economics and Commerce revealed that 200 banks failed in England between 1815 and 1850; a period of 35 years. Among the reasons attributable to that was fraud. Nwankwo in Uchenna and Agbo (2013) traced the history of bank failure in Nigeria to 1930s which brought about crisis of confidence in Nigerian banking industry when all indigenous banks collapsed except one- the National Bank. Similar incidence repeated during the banking ‘boom and crash’ of the late 40’s when all but four indigenous banks were liquidated. Furthermore, between 1952 and 1954 16 out of 21 indigenous banks failed. Also, in late 1990s, 26 failed banks were liquidated while others were restructured, acquired or sold outright. In all these periods, Nwankwo (2005) asserted that fraud played a prominent role. These bank failures led to significant financial loss to depositors, loss of confidence by the banking public, and cast doubt on the ability of Nigerians in managing banking business as the primary objective of banking-safe keeping of money seemed threatened. Government in reaction to these developments set up the Paton Commission of Inquiry in 1948 with the outcome leading to first banking regulation in 1952 and establishment of CBN in 1958. The bank reform of 1986 (Structural Adjustment Programme, SAP) lead to proliferation of banks and boom till late 1990’s (Olukotun, et al, 2013).

In 2005, there was another reform in Nigerian banking sector to avert imminent collapse. The 2005 reform was characterized largely by mergers and acquisitions of many banks to the extent that only 25 banks emerged out of 89 after the exercise. Notwithstanding the above measures, the threat of fraud has continued. For instance, according to Nigerian Deposit Insurance Corporation (NDIC) annual report, (2010), 1,532 cases of fraud were reported involving 21.29 billion naira with expected actual loss of 11.69 billion naira. Also, in 2011, 2,352 cases of fraud were reported involving 28.4 billion naira with expected actual loss of 4.071 billion naira. This represents a 53.5 percent increase. In 2014, there were 10,612 reported cases of fraud as against 3,786 in 2013 with involvement of 25.61 billion naira and 21.80 billion naira respectively. This represents about 17.5 percent increase in amount involved. The expected actual loss for 2014 was 6.19 billion naira as against 5.76 billion naira in 2013, representing an increase of about 7.5 percent.