Fraud as a Negative Catalyst in the Nigerian Banking Industry

Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 2(5):357-363 (ISSN:2141-7024)determine the difference between means as shown intable 2.Table 3 shows that irregular training combined withpoor leadership skills is the stronger combination ofvariables causing fraud. The ANOVA in table 4shows that communication gap in combination withinadequate training as strongest influence within thegroup. Although between groups the combination ofpoor leadership skills as well as inadequate trainingare the strongest communication channelThe central bank of Nigeria recorded various casesof frauds as presented in table 5.On the contrary, the Nigerian Deposit insurancecorporations (NDIC) annual report shows somevariations in the estimate over the last number ofyears. In 1998, 1999, 2000 and 2001, the money’slost to fraud were recorded as N689.2m, N2730.57m,N2851.11m and N11, 243.98m respectively. TheNDICS’ report on frauds for the quarter endedSeptember 2002 revealed that the incidence of fraudsin banks is on the increase. In all, banks reported 415fraud and forgery cases valued at about N15,274billion between June and September 2002. Aconsolidated report on fraud and forgeries collated bythe committee of chief inspectors show that a total of292 fraud attempts were made on banks in Nigeriafrom January 2000 to September 2000. The amountinvolved was seven billion naira.There have also been compiled reports from Nigeriancommercial and merchant banks. In 1996, a declinewas recorded from 606 cases to 487 in 1997, theamount; however, rose from N1, 600.82m in 1996Nigeria recorded the following cases as shown intable 6. From the table above, there was a rapidincrease in the amount of money actually lost eventhough the number of cases fell from 612 in 1998 to403 in 2000 and skyrocketed in 2001 but fell again to628 in 2002. Even with the reduced number of cases,the amount lost increased rapidly except for a fallfrom N1,243.55m in 1996 to N788.87m in 1997 andthen from N7.404b in 1999 to N906.3m in 2000. Onthe contrary, the Nigerian deposit insurancecorporations (NDIC) annual report shows somevariation in the estimates from 1998 to 2002. Theseestimates were N689.2m in 1998, N2730.57m in1999, N2851.11m in 2000, N11, 243.98m in 2001and N15.274b in 2002 indicting a steady butstaggering increase in money lost to fraudsters.Surprisingly, a consolidated report of fraud andforgeries collated by the committee of chiefinspectors show that a total of 292 fraud attemptsamounted to N7b in 2000 alone. There have also beencompiled reports from Nigerian commercial andmerchant banks showing at first a decline in no ofcases from 606 in 1996 to 487 in 1997 but anincrease in amount lost from N1, 600.82 to N3,777.90m. then a rise in no of cases to 573 but adecline in the amount of N3,196.57 in 1998 then toN7.404b in 1999.In the last four to five years, the number of cases offraud has declined but the amounts lost in these fewercases are devastating. First, Bank of Nigeria, one ofthe old timers, recorded the cases in table 7.Lookingat the estimates above, in 1999, the number of caseswere 95 amounting to N248.34b but fell to 69 casesamounting to N169.12b in 2000 and fell again in2001 t0 54 cases amounting to N128.17b. Year 2002saw an increase in cases to 61 and also an increase inamount to N231.54b and then another fell in 2003 inthe amount lost to N212.7b even though number ofcases increased to 66. From the tables, leadershipstyles could be a serious cause or influence on theimpact to perpetrate fraud. Also, communication,some respondents felt the lack of inadequatecommunication channels is also a determinant of thelevel or rate of fraud in the banking industry. Inaddition, the lack of training and proper skills is thestrongest factor causing fraud. This stems from theinability of the staff to effectively carry out a job.Training creates an awareness of possible techniquesby which a fraudster could carry out his activities.Therefore, the lack of training enhances the avenuefor fraud because people are not skillfully equippedto handle and tackle fraud. Also they are unable torecognize the intent to perpetrate even when it isquite glaring. Training is a very vital aspect ofbusiness, to keep with changing times and evolvingtechnology. Just in the same way as technologyevolves and develops; fraudsters are evolving newtechniques and developing more crafty ways to getaway with huge sums of money. Fraud, which hasbeen on the increase at an alarming rate hasaccordingly gained the increasing attention of thegovernment, monetary and supervisory authorities inview of the fact that frauds result in huge financiallosses in banks, their customers, the depletion ofshareholders’ fund and capital base and loss ofconfidence in the financial system which mayultimately precipitate failure of the sector.This study identifies those actors or elements thatcause fraud. It looks at motivational factors such asfinancial incentives, promotions and bonuses as wellas leaves and leave-allowances. The absence of suchmotivational factors could lead to dissatisfaction andaccording to the differential association theory offraud, the member of staff sees the benefits offperpetrating fraud as more favourable than hispresent position and this pushes him to commit thefraud. Looking at the impact of fraud on profits,reputation and customer confidence, the occurrenceof fraud has inevitably reduced the profits making.Also, there were cases where the CBN comes in toregulate activities and even sometimes wind up thebanking operatives of some banks.360