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A SURVEY OF FRAUDS IN THE NIGERIAN BANKING INDUSTRY AND THEIR IMPACT

A SURVEY OF FRAUDS IN THE NIGERIAN BANKING INDUSTRY AND THEIR IMPACT

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A SURVEY OF FRAUDS IN THE NIGERIAN BANKING INDUSTRY AND THEIR IMPACT

ABSTRACT

Fraud is a terrible issue that, in my opinion, has infiltrated Nigeria’s banking industries and society in general, putting any institution in a condition of liquidation.

This study focuses on the nature and many types of fraud, the causes of bank fraud, the level of fraud in banks, the impact of bank fraud, and the detection and control measures used by management to prevent fraud incidences.

The goal of this research is to determine whether there is a significant amount of fraud in Nigerian banks, whether Nigeria practises, aids, or abates fraud, and to assess the effectiveness of the internal control system in detecting and preventing fraud in the bank.

Journals, textbooks, and previous work were used to acquire data. The findings revealed that compensation for banking services and maintenance have helped to reduce the incidence of fraudulent activities in the bank.

In light of this, it is recommended that an adequate internal control system be maintained, as well as effective fraud management and strict adherence to administrative management policies, to check and possibly eliminate fraud incidence in the bank.

Fraud detection and prevention should be a collaborative effort by banks, their customers, the general public, and the government. Fraud in the banking system should be minimised as much as possible because it kills the bank and damages a nation’s economy.

Finally, the research work concluded that continual vigilance should be the watch task if fraudulent practises in the financial business are to be minimised and possibly abolished.

BACKGROUND OF THE STUDY

With an eye on becoming an industrialised nation, Nigeria is experiencing the actual birth of professional human resources, which has enabled the establishment of service industries and other corporate organisations. This conviction was so strong that the desire to provide financial services could no longer be ignored.

To spur economic growth and development, the government and several organised private organisations were granted licences to operate banks, in addition to a few banks that were already in operation to provide structured financial services.

This bank employed young men and women, but as with any human attempt, there were difficulties. The prevalence of fraud is one of the primary difficulties confronting the financial industry.

Bakere (2002.1) stated that the incidence of frauds in the banking industry has recently posed a very severe threat to the very existence of financial institutions and is a concern to regulatory agencies and the banking public.

Despite the tough steps implemented by monetary authorities and internal control procedures to check the actions of fraudsters, bank fraud is on the rise.

According to Edozie, as reported by Adebayo (2001.5), available information show that thirty-one banks reported fraud and forgery instances throughout the period (January – March 2002).

Banks are well-known for being institutions that rely on public trust. Today, the premise is no longer valid because bankers themselves either commit fraud or actively participate in fraudulent actions against her banks (employers).

According to the Nigerian Deposit Insurance Corporation (NDIC) Annual Report (1997.9), the majority of those banks were governed by a few greedy directors and staff who committed frauds and other unethical practises against their institutions in order to erode public trust in banks.

This circumstance has contributed significantly to the failure of numerous banks. According to Agbata (1998:13), one cannot escape recognising the reality that the hardship in the banking industry was caused by fraud.

Now that examples of fraud have been established in banks, there is a need to investigate the difficulties associated with fraud, their impact on the macro-economy, and how these problems are being addressed, thus the need for this study.

1.2 STATEMENT OF THE PROBLEM

In general, movements in every nation’s economy result from the interaction of money and other economic variables. In Nigeria, the effects of money and banking have been the primary drivers driving macroeconomic performance.

Despite their unique position among other sectors of the economy, banks (particularly commercial banks) confront a number of economic crises, most notably fraud.

As a result, the investing public has been critical of Nigerian bankers’ lack of devotion and dedication to duty. This stems from the reality that the banking industry’s suffering was caused by fraud committed by bankers.

Bank directors and management are also chastised for their incapacity to effectively direct and control men and materials. Poor accounting on reconciliation procedures may provide a chance for an employee to identify a weakness and design a plan to exploit it.

This is due to a bank’s lack of internal control. Understanding what motivates these people and how they can rationalise their behaviour is critical to preventing it. They are also chastised for abusing their positions and authority to cheat their institutions.

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