The research is on the management of fraud in Nigeria Commercial Banks. The main objective of the study is to identify the causes of fraud in commercial banks. The researcher analyzed the data collected based on the response from the questionnaires distributed

The major findings of the study are:

1. The causes of frauds in commercial bank includes

a. Poor management and poor security arrangement

b. Inadequate staff training

2. The various types of fraud in commercial banks include:

a. Loan fraud

b. Cheque fraud

c. Advance fee fraud. On the basis of the  above findings, the study concludes that management of fraud in commercial banks is of the great importance and has a lot of benefit which includes given confidence to the bank customers that their money is safe, encouraging or attracting local or foreign investors. Based on the finding, it is recommended that:

a. Government should establish more anti-fraud and anti- corruption agencies to assist in sanitizing the Nigerian banking system.

b. Bank‟s management should employ strategies that  will ensure early and prompt detection, prevention and control of fraud in commercial banks.


Title Page… i

Approval page ii

Certification… iii

Dedication… iv

Acknowledgement v

Table of Content vi

List of Tables… vii

Abstract… v

Chapter One:


Background of the Study…1

Statement of the Problem2

Objectives of Study…3

Research Questions…4

Research Hypotheses4

Significance of the Study…5

Scope of the Study…6

Limitations of the Study…6

Definitions of Terms…7

: Historical background of CBN and Commercial

Banks in Nigeria 9



Review of Related Literature12

Origin of Fraud12

What                                                     is Fraud?.12

What                is                Bank Fraud?.15

Nature and Types of Bank Frauds…16

major Causes of Fraud in the Commercial Banks…26

Implications of Fraud on the Bank and Entire Economy of Nigeria


Punishment and Penalties to fraud Perpetrators…37

Fraud Detection, Prevention and Control40

CBN      Effort       to       Fraud Control9

Extent         of         Fraud         of Banks…59


Chapter Three

Research Methodology63

Area of the Study63

Sources of Data…63

Population of Study…64

Sample Size Determination…64

Instrument used for Data Collection67

method of Data Analysis…68


Chapter Four

Data Presentation Analysis and Interpretation…70

Analysis of Questionnaires Distribute and returned71

Section A: Demographic Data…71

Section B:


Hypotheses                                      Testing84

Chapter Five

Summary of Finding, Conclusions & Recommendations.

Major                                                           Findings95

Conclusion 9


Recommendations… 9


Bibliography Appendix A Questionnaire B


Table 4.1:  Age Distribution of Respondents… 71

Table 4.2: Data on the Sex Distribution of the Respondents 71

Table 4.3: Data on Education background 73

Table 4.4: Data on the martial status of the respondents 74

Table 4.5: Data on Impact of fraud on bank performance… 74

Table 4.6: Data on the relationship between volume of work & fraudulent activity… 75

Table 4.7: Data on the impact of poor management and poor security arrangement in commercial banks… 76

Table 4.8: Data on the causes of bank fraud… 77

Table 4.9: Data on the effectiveness of CBN… 78

Table 4.10: Data on what constitutes the types of fraud… 79

Table  4.   11:   Data   on   the   spate   of   fraud   in   commercial banks… 79

Table 4. 12: Data on the Control Fraud… 80

Table 4: 13: Data on what makes up personal control… 81

Table 4:14: Data on the constitution of Accounting Control


Table 4: 15: Data on Inventory Control… 83

Table 4: 16: Data on respondents response on how fraud can be detected and control… 84

Table 4: 17: Respondents responses on whether poor management and poor security arrangement can cause fraud… 87

Table 4.18: Respondents responses on the effectiveness of CBN… 90

Table 4.19: respondent response on the spate of fraud in commercial banks… 92




Over the years, irregularities have been the problems of commercial banks. The term irregularities are used to refer to intentional distortion of financial statement and misappropriation of assets  for  whatever  purpose.  Fraud  is one type of irregularities. Fraud, in auditing guideline, is used to refer to irregularities involving the use of criminal deception to obtain unjust or illegal advantages.

Fraud may entail that  proper  accounting  records  have not been properly  maintained,  it  may  also  point  out  that some internal control system are not effective and could not form a reliable source of information for an auditor. Existence of fraud in a financial statement endangers it from showing a true and fair view and complying with the provision of the companies and Allied Matter Acts  (CAMA) 1990.

Therefore, fraud in banks must be looked at generally as “acts that involves the loss of assets by banks through dishonest and  deceitful means. The fraudster intentionally

but dishonestly benefit himself to the detriment of the bank, the bank staff, bank customers and any other member of the public via banking operations. Fraud can be committed by bank staff, bank customers or a third party that is non- customer (Eze, 2004).


Fraud in the Nigerian Commercial banks has been notable and has remained an unavoidable problem and has resisted all practicable treatment. This incidence  has  not only become an incessant phenomenon but also been on the increase in the recent past.

In recent years, the volume and frequency of fraudulent practices in Nigeria banks have been on the increase. According to the Nigerian Deposit Insurance Corporation (NDIC), the level of reported fraud in Nigeria banks rose from N 804m in 1990 to N3, 199m in 1998. Furthermore, the actual/expected loss to the amount involved in fraud rose from 3 percent in 1990 to 22 percent in 1998. This is evidenced in the report, which is the highest fraud ever reported in any particular year by a Nigerian bank in 1998,

when united  Bank  for Africa Plc  wrote  of  N786m on account of fraud.

The growing scope and scale of fraud in the Nigerian banking industry is surprising and the general confidence reposed in the banking institutions has become eroded since the new concept of distress, bank failure and closures in the recent years. From available records, out of about 114 financial institutions operating in the country as at 1996, 52 were distressed while 6 were acquired. With the frequent fraud, people are no longer at ease keeping their monies in the commercial banks but instead prefer to keep them  in their houses or prefer to hold them in wares.

The commercial banks shares 90% of all cases of malpractices, forgeries and frauds (Wikipedia 2007).


The main objective of the study includes the following.

(1) To access the impact of frauds on banking public and on bank performances.

(2) To identify the causes of bank fraud in Nigeria.

(3) To examine the effectiveness of the supervisory and oversight functions of the CBN.

(4) To ascertain the incidence of fraud in the Nigerian banking industry in the last 5 years.


The study poses the following research questions.

(1) What are the impacts of fraud on banking and on bank performance?

(2) What are the causes of bank fraud in Nigeria?

(3) How effective is the supervisory and oversight functions of the CBN?

(4) What are the incidences of fraud in Nigerian banking industry in the last 5 years?


The following research hypotheses will be formulated for the purpose of the study.

1. Ho: Economic  down  turn  and  termination/retirement  of staff are not  impact  of  fraud  ob  banking  and  on bank performance.

Hi:    Economic  down  turn  and  termination/retirement  of staff are impact of fraud ob banking and on bank performance.

2. Ho: Poor Management and security arrangement in commercial banks do not cause fraud in Nigerian banking industry.

Hi: Poor Management and security arrangement in commercial banks causes fraud in Nigerian banking industry.

3. Ho: The supervisory and oversight function of CBN in protecting the depositors, economy, and banks‟ customers is not effective.

Hi: The supervisory and oversight function of CBN in protecting the depositors, economy, and banks‟ customers is effective.

4. Ho: The spate of fraud in Nigerian banking industry is low.

Ho: The spate of fraud in Nigerian banking industry is high.


The study of these kinds is very important and timely, especially at this period when the Nigerian central  bank, Nigeria deposit insurance corporation (NDIC) and government and its agencies are doing something to curb the menace of fraud in commercial banks. The study  will not  only  raise public awareness of the presence of fraud in the commercial

bank but also grants public awareness of the existence of anti- fraud investigators, thus assisting and encouraging those who may witness or suspect act of fraud being committed by people to report it and provide evidence.

The study will go a long way to sensitizing the public on the adverse effect of fraud on commercial banks and the Nigeria economy at large. In addition, it will equally serve as  a reference material for researchers in the same field.


The scope of the study seeks to deliberately delineate the boundaries of  the  study  (Onodugo,  2010).  In  this  research work, treating the problems as a whole will be too much for the requirement of this work. Therefore, Enugu state is used for the analysis of the work to determine the role of CBN in the management of fraud in Nigerian commercial banks.


The study focuses only on the management of fraud in Nigeria commercial banks. Constraints to the study are enumerated;

1. Time Constraint: The limited nature  of  time  available for the researcher could not allow him to collate all the information needed for the study.

2. Financial Constraint: Finance which is the driving force of any research work was insufficient. Due to this constraint, the researcher could not visit places where relevant information for the study could be obtained.

3. Attitude of the Respondents: Some of the s respondents show negative attitude towards the study because they felt that there is no financial benefits attachment.


Assets are what a person or business owns. Castle and Owen (1992).

Commercial Banks:

Commercial bank is any bank whose business include the acceptance of deposit withdrawable by cheque or cash (Okeke, 1996).


Fraud refers to an intentional act by one or more individuals among management employees or third parties which results in a misrepresentation of financial statement. (Adeniyi, 2004).


An auditor is an independent person or body charged with the responsibilities of detecting financial irregularities (fraud) which might impair the truth and fairness of the view given by the financial statement (Eze, 2001).


Auditing is the process carried out by the independent examination of and expression of opinion on the financial statements of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation (Adeniyi, 2004).

Central Bank f Nigeria (CBN):

CBN takes financial policy and regulations as well as supervision of other financial institutions.

Nigeria Deposit Insurance Corporation (NDIC):

NDIC is an independent agency of the federal government of Nigeria established to protect depositors and guarantee the settlement of insured funds when a deposit-taking financial institution can no longer repay the deposits. Thereby helping to maintain financial system stability.

Capital Base:

Capital base is the amount contributed by the powers of a business which gives them right to enjoy all the future earnings (Anyanwokoro, 1996).

Shareholders Funds:

Shareholders funds are paid up capital, share premium statutory reserves. Retained earning, general reserves, minority interest and other subsidiary reserves excluding preferences shares and revaluation reserves (Iganiga and Anyanwokoro, 1996).


In 1948, an enquiry under the leadership of G.D Paton was established by the colonial administration to investigate banking practices in Nigeria. Prior to the enquiry, the banking industry was largely uncontrolled. The G>D Paton report, an offshoot of the enquiry became the cornerstone of the first banking legislation in the country; the banking ordinance of 1952. The ordinance was designed to prevention viable banks from mushrooming, and to ensure orderly commercial banking. The banking ordinance triggered a rapid growth in the industry and with growth also came disappointment. By 1958, a few

numbers of banks had failed. In  1958,  a  bill  for  the establishment of Central Bank of Nigeria was presented to the House of Representatives of Nigeria. The Act was fully implemented on July 1, 1959, when the Central Bank of Nigeria Came into full operation.

The Nigerian banking industry which is regulated by the Central Bank of Nigeria, is made up of; deposit money banks referred to as commercial banks, development finances institutions and other financial institutions which includes; micro-finance banks, finance companies, bureau de changes, discount houses and primary mortgage institutions.


Adeniyi, A. (2004), “Auditing and Investigation”. Lagos, El- Toda Venture Limited.

Castle, E.F & Owens, P.N. (1992), “Elements of Banking”, 2nd Edition. New York, pretince Hall.

Eze, J.C. (2004), “Principle and Techniques of Auditing”.

Volume II. Enugu, Computer Edge Publishers.

Johnson, U.O (2007), “Introduction to Project writing”.

Enugu, New Dimension Publishers.

Onodugo, V.A, Ugwonah, G.E. & Ebinne, E.S. (2012), “Social Science Research: Principle, Method and Applications”.

E. L‟ Demak Publishers Enugu Nigeria. https//www.n.m.wikipedia,org/wiki/Central-Bank-of-Niegria https//www.icr.sakescapital,com/research-int/background/Nigeria-

https//banking-industry,,htm/ https//www.cenbank,,org/supervision.




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