ABSTRACT
This project, “fraud in the Nigeria Banking Systems problem and prospect a case study of First Banking of Nigeria plc Abakaliki and Oceanic Bank Plc Abakaliki branches”, was carried out to examine the various types of fraud as well as the causes and sources. It was also meant to explore significant effects of fraud on banks. Finally, the study was equally embarked upon to proffer possible remedies, detection measures, prevention and control of the subject matter in the Nigeria Banking system. Data was collected through the questionnaire (Primary) and interviews as secondary data thus serving the inductive research method. Statistical analysis techniques such as the chi-square distribution test- analysis techniques and percentages were adopted to analyze the data collected after which several findings were made, which included: the desire to get rich quick accounts greatly for persistent bank fraud and that the internal control system in the Nigerian banks is weak and ineffective .After which it was concluded that, the money laundering (prohibition) Act is the best strategy to combating fraud in the banking industry.
CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
The entire world has become increasingly aware of the destructive effect of a lack of accountability and transparency in both public and private life. This awareness is so pervasive throughout the world that governments, business organizations and non- governmental organizations alike are involved in crusades to promote accountability and transparency and prevent corrupt practices in all its ramifications. These crusades have gathered so much steam that international award for the “Most corrupt” and least corrupt country” in the world now exist. It is very unfortunate, and a national embarrassment that our father land which we hope to give to our children as a legacy has repeatedly won the former rather than the later price.
The fraudulence for which our nation was given a price is not located in the sky over our land; it is the aggregation and multiplication of little acts of fraudulence in our interactions with one another (Ezeogu 2007:10).
The dark days of tyranny, military rule and social enslavement were thought to be the period in which corruption festered in Nigeria and fraud became common place, but have you ever thought of the role some fraud stars played in the inability of some commercial banks to meet their obligations to its customers, owners, stake holder and the economy?
Has it ever occurred to you to search out how a sizable proportion of financial institutions had liabilities exceeding the market value of their asset, which may lead to ruins and other portfolio shifts and eventually, collapse of the financial system?
Society has long adopted to plunder the noble Nigerian identity and from military to civilian regimes, pubic office holders had followed strictly the unwritten constitution to live up to societal expectations. Values were waded off in exchange for graft and pecuniary benefits, millions were defrauded of their rights to good education, basic health, good roads and electricity, housing has become the preserve of the rich and professionals have lost chunk of their respectability.
The entire world has become increasingly aware of the destructive effect of a lack of accountability and transparency in both public and private life. This awareness is so pervasive throughout the world that governments, business organizations alike are involved in crusades to promote accountability and transparency and prevent corrupt practices in all its ramifications.
Fraud and errors are occurrences and like winds, they blow no good to any firm, industry, association, business organization and government. Instead they bring regrets, reduced patronage, losses, distress and failure to such business and organizations as mentioned above.
It is not also interesting to know that like the ‘canker worm’, they have eaten deep into the fabrics of the Nigerian financial institutions especially the banks.
It is not uncommon to day to hear of fraudulent acts like uninsured deposits, theft of identity, forged or fraudulent documents, wire fraud, cover of losses by rogue traders, demand draft fraud, and payment card fraud, cheque kitting, management fraud, Automated teller machine fraud etcetera in our banks.
Ojaide (2000:18) posits, “Frauds are acts of dishonesty, deceit, falsifications and manipulations perpetuated to gain undue monetary and non- monetary benefits”. He further states that accounting, fraud and fraudulent practices are illegal acts involving misappropriation of assets (cash, stocks, book debts, fixed assets) manipulation and falsification of accounting books and records etcetera. In his opinion, the get rich quick attitude of many Nigerians, greed, poverty and the falling standard of living are some of the reasons for the increase in the rate of fraud and fraudulent practices in Nigeria.
Although, frauds, errors and forgeries in banks are global phenomena, their growth Nigeria have been astounding. Bank frauds and errors in general inflict untold hardship on bank owners, staff, customers and their family members, as most bank failures are always associated with larger scale frauds.
Frauds and errors and their effects on banks in Nigeria today created room for doubt on the reliability of financial record and reports kept by management except perhaps on the very small scale business. The financial report user is not in a position to process and produce financial accounting information personally, nor has he the day to day knowledge of company affairs with which he can use as a base for his judgment.
Modern day banking in Nigeria can be traced to the period 1892 when the first commercial bank- African Banking corporation- was established. The bank was the first to open its branch in lagos. The founder was mess’s Elder Dempster and Co; a shipping firm based in Liverpool.
On account of difficulties experienced in the area of management, the bank decided to transfer its interest to Elder Dempster and Co. in 1893. In response to the changes through management restructuring, the bank metamorphosed to form a new bank known as the British Bank of West Africa (BBWA) in 1894, with an initial capital of £10,000. Okoro S. A (2001:17) affirms that: “The Bank of British West Africa was the first surviving bank in Nigeria and registered in London a limited liability company in March 1894 with first Lagos branch being opened the same year.
Following the establishment of this Lagos Branch, other branches sprang up in other countries of West Africa like Ghana, free town to mention but a few. The BBWA later opened its second Nigerian branch in old calabar in 1900 that is, six years later. During this period of dynamism, there was complete absence of legislations governing the banking operations in Nigeria. This culminated in the banking distress experienced in the 1930s. At least about 21 banks failure were recorded between 1930 and 1952. In reaction to this ugly development that was ravaging the banking, the then colonial government set up a commission of inquiry under sir, patron to investigate the cause and proffer remedies/solutions. Consequent upon their report, the first banking legislation was passed in 1952. At this time foreign dominance of the industrial sector was intense even till after independence. This made the government to launch the indigenization policy in 1972 which conferred on the Nigerian Government 40% equity share in all companies registered in Nigeria. As a result of this enterprise promotion decree (i.e. indigenization decree), the federal government acquired huge equity share in the BBWA. Similarly following the decree demand, the BBWA changed its name to First Bank of Nigeria limited in 1973.
