Fraud means any act of dishonesty, deceit, and imposture. According to Kirk Patrick [1985], a person who pretends to the something he is not is a Fraud, deceptive trick, Cheat, and swindle. By extension, Fraud includes embezzlement, theft, or an attempt to unlawful other, misuse or harm the assets of the bank [Bank Administration institute, 1989] Fraud can be committed by employees, customers, or another operator independently or in conjunction with others inside or outside the bank.

This research work is centered on prevention control and Effect on the Nigeria Economy [A case study of First Bank Nigeria Plc]. This work consists of five chapters. The first chapter is the introduction and general description, objection and significance of the study, problem, and justification of research, historical background of business, major hypothesis, scope, and limitation of the study.

The second chapter involves the review of relevant past knowledge on the topic under the heading ‘’literature Review’’ Here several textbooks, journals, academic discussions by notable feature, were referenced.

Chapter three is Research Methodology and chapter four is the analysis and interpretation of data and testing hypothesis.

Chapter four also emphasizes basically on past presentation, analysis, and discussion of findings.

Finally, chapter five is the end of the chapter which emphasis on the project, summary, recommendation with being drawn as to highlighted, conclusion shall be drawn as to whether fraud has an effect on the Nigerian economy or not. To sum it up, recommendations shall be made for future works.

TABLE OF CONTENTS                                                                                 PAGE Title page                                                                                         i

Certification                                                                                     ii

Dedication                                                                                        iii

Acknowledgment                                                                              iv

Abstract                                                                                           v

Table of contents                                                                             vi


1.0                       Introduction                                                                           1

1.1       Background of Study                                                      3

1.2       Statement of the Problems                                                   5

1.3       Objective of Study                                                           5

1.4       Significance of Study                                                      5

1.5       Scope of Study                                                                6

1.6       Limitation of study                                                         6

1.7       Hypothesis                                                                             6

1.8       Background of the First Bank Plc                                         7

1.9       Definition of Terms                                                                9

References                                                                              10

CHAPTER TWO:  Literature Review                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

2.0       Introduction                                                                           11

2.1       Historical Background                                                          11

2.2       Model Specification                                                                12

2.3       Literature Review                                                                   13

2.4       Theoretical framework and Empirical Studies                   15

2.5       Nature and Analysis of Fraud and Types, causes

of  Fraud                                                                                22

2.6    Types of Fraud                                                                       29

2.7    Ways of Defrauding Banks

2.8    Measurers for controlling and preventing fraud in

          First Bank                                                                              41

2.9    Summary of Chapter                                                      50

Reference                                                                                52

CHAPTER THREE: Research Methodology

3.1       Introduction                                                                           53

3.2       Re-Statement of Research Questions and Hypothesis       53

3.3       Research Design                                                                    54

3.4       Sampling Design and Procedure                                         54

3.5       Data Collection Instrument                                                  55

3.6       Procedure for processing and Analyzing collected data     55

3.7       Limitation of the Methodology                                             56

Reference                                                                                57

CHAPTER FOUR: Presentation and Analysis of Data

4.1       Introduction                                                                           58

4.2       Opinion concerning research question                                63

CHAPTER FIVE: Summary, Conclusion, and Recommendation

5.1       Summary                                                                                67

5.2       Conclusion                                                                             68

5.3       Recommendations                                                                 69

Bibliography                                                                          72

Questionnaire                                                                        74


1.0             INTRODUCTION

Historically, there are records to show that indirectly, banking activities started in Nigeria in about 1861 when shipping company ELDER DEMPSTER LINE started the objective of making easier transactions with the company’s customers in Nigeria.

In 1892 African Banking Corporation (ABC) was established as the first banking institution which was initiated by the chairman of ELDER DEMPSTER.

It opens its first branch in Lagos in 1892, by 1975, there were seventeen banks operating. Before 1892, Nigeria was evidently underdeveloped economically, even in 1975 despite the growth in the number of banks Nigeria is still developing, it is true, however, that the number of banks should not be the only major aspect of development that would relate to economic growth.  So many other factors are determined with the various resources endowment, labor supply, and of course capital.

An economy that is blessed with many resources and valuable agriculture crops and suitable land – water mix, is in a better position to develop than another economy without these. In the same vein, a country that does not have an adequate supply of requisite manpower is at a disadvantage.

Suffice to say, that for the purpose of this study, emphasis will be based on of banking sector as the only major aspect of economic growth that would relate to the economic development of a nation.

The banking sector consists of the pillar on which the economy of any nation can financial service is one of the main points of which economy revolves.

The unique roles of banks can be attributed among other things to the importance of money in the scheme of things as it performs a fundamental role in shaping the economic destiny of the country Nigeria.

Bank supports the local economy by mobilizing funds from the surplus sector to the deficit sector; by serving the credit needs of the communities and provide a safe for the cash balance of individuals, businesses, and government.

The institution itself has witnessed tremendous growth from a few indigenous banks in the ’50s to one hundred in the ’90s.  There had been great diversification in the banking industry as most Merchant Banks now have licenses to practices universal banking.  

It is widely recognized that the responsibility of banks is multifarious and sometimes conflicting as to the interest of many parties regarding the activities of banks of variance.  Depositors expect maximum liquidity and the highest return for their deposit, borrowers want deep money and shareholder expect maximum profitability.  The government regulatory authorities are interesting in prudency and safe operation so as to systematic stability because the failure of a single bank will have more micro and macro impact on the institution in other industries as a result banks should synchronize these conflicting interests and they cannot afford to fail.

In fact, some banks failed even before they open for business, what kept many banks up for the period of 3-5 year is that they lasted their ability to deceived the banking public and hoodwink The Central Bank of Nigeria.

In order to minimize, it is not eradicated, the incidence of fraud in banks, the federal government of Nigeria had promulgated the advance fee fraud and other offenses decree in 1995 whereby a failed bank tribunal was set up to prosecute offenders as regards financial malpractices within the banking sector.


The principal aspect of a bank’s business must consist of receiving money for the credit of the current account, which the depositor could withdraw on demand by cheques before we can conclude that an institution is regarded as a bank.

The banking industry is dynamic and diverse among all sectors of the economy and it plays a significant role in economic growth and development.

Fraud in banks is not a new problem, it is in fact as old as the origination of a bank.  Fraud has been in the economy before the advent of banks, in fact, fraud is a cankerworm that is eating deep into bank administration in Nigeria.  It happens in different levels of the economy i.e the government sector, educational sector, transportation sector, etc.

Fraud in the entire economy has continued to increase over the years as no major steps have been taken to eliminate this problem.

Fraud is defined as “the cut of depriving the resources or fund or asset of a bank or a person to the non-viable project of personal use”.  It occurs at all levels of management in banks.

This problem varies from management, managers, to the officers, bank inspectors, clerks, cashiers, and supervisors, etc. sometimes, it occurs between two departments in a bank.  When fraud occurs in a bank on a continual basis, banks become unable to meet their daily financial obligation and when this occurs frequently the banks are forced to declare themselves distressed. 

Many banks have lost a great percentage of their assets, customer deposits, profit, and caring to fraud.  The problems of fraud in banks have discouraged and scared foreign investors away from investing and have led to capital flight since investors are looking for places where they can get a high return on their investment.

According to sections 39 and 40 of the  NDIC Decree, No 22 of 1988 mandate insured banks in Nigeria to render to the corporation return on fraud, forgeries, or outright theft occurring in their organization and report any staff dismissed, terminated, or advised to retire on the ground of fraud practices.  Records have shown that only a few banks render returns on fraud and other related malpractices, even when such cases exist at the time of rendering their statutory return to the regulatory authorities.

Therefore, the problem of fraud needs to be thoroughly analyzed in order to encourage the growth and development of the banking sector because whatever happens to the banking sector will definitively affect the general economy.    

The level of fraud in Nigerian banks today assumes an endemic dimension as government officials and their cohorts are now leading the most corrupt country in the world recently.    In order to be able to progress remedies for dominating fraud in the bank, it is useful to identify the commonest cause of bank fraud and this will lead to the provision of control measures that surfaces as the research progress.


The sub-optimal performance of the Nigeria banking industry is due to an array of the problem of these problems, the issue of fraud in our banks is one bank that is most untreatable and monumental.   The magnitude of this problem and its implication for the industry has inspired this research of fraud in banks.

There is a clear relationship between bank fraud and the level of customer confidence as a previous study on bank fraud clearly shown, it means that customers have a tendency to base their choice and patronage of banks on the extent to which the bank is free of fraudulent practice.

If a bank's financial health is in doubt, investors and depositors will not like to invest their funds in such banks, this has raised the question of how can investors and depositors evaluate the performance of banks?


The basic objectives of this study are:

To determine the effect of fraud or the consequence of fraud in Nigeria's Banking Industry. To find out how fraud penetrated into banks and how it can be detected To encourage the eradication of fraud in our financial institution. Another objective is to win or retain the confidence of all investors. To minimize the incidence of fraud in Nigeria's economy. To deduced from grave implications for the banks and economy as a whole of the rising wave of bank fraud which needs adequate attention.


The significance of this study is that this work will be beneficial to investors, shareholders, and other interest members of the public as they will be able to know the extent of controlling and preventing fraud that existing in their company.

The significance of this study to the banking industry and society at large cannot be over-emphasized at least to probe into causes, effects, and solutions to the incessant fraud practices in banks.

1.5             SCOPE OF THE STUDY

For the purpose of this study the way of preventing and controlling fraud in first bank Nigeria plc.

As well as the effects on the Nigerian economy will be the focal point of this study.  All also the actual amount involved and actual or expected loss in bank fraud be multiples of the reported figures as many banks had reneged in rendering their required returns on frauds.


This study is limited due to the time factors i.e availability of little time set aside by the management of university authority.  The un-cooperative attitude of the staff of the first bank of Nigeria and other sources of data.  As regards to the flow of information also hinder the researcher in the course of this study. 

1.7             HYPOTHESIS

The following hypothesis will be in this study:

H0:     The fraud in the bank has an effect on the Nigeria economy

H1:  The fraud in banks does not have an effect on the Nigerian economy.

H2:  The incidence of fraud in the bank cannot be reduced in Nigeria

H3:     The fraud in banks does not have an effect on customers.


First bank plc of Nigeria is a leading institution in Nigeria with over a hundred years of banking experience, industry, and resilience behind it. 

It was established and distinguished itself as a leading and major contribution or contributor to the economic advancement and development of Nigeria.

It is the oldest bank in Nigeria, which was founded in 1894 by a shipping magnate from Liverpool, Sir Alfred Jones the bank commences as a small operation in the office of ELDER DEMPSTER and company on March 31, 1894, with head office in Liverpool.  “Bank of British West African (BBWA)”

The bank has metamorphosed from the bank of British West Africa (BBWA) in 1957 to standard Bank of Nigeria Western African Ltd.  Over the years, experience the bank has a phenomenal growth with a share capital of N55.6 million in   1980, the bank share capital growths to N1016 million as of 2002.

First Bank Plc has remained leading banking in Nigeria with a total asset base of over N409.1 billion and posted a profit after tax of over N14.4 billion as of March 2003.  The bank has a branch network of over 500 branches spread throughout the federation as of 2008, May.  Which majorities are on-line; this is done to satisfy the need of their customer.

First Bank Plc has diversified into a wide range of banking activities and services, this includes corporate and retail banking, registrarship, trusteeship, and insurance brokerage, especially electronic banking system.  Over the years, the banks experienced several restructuring initiatives, reposition and take advantage of opportunities in the changing environment. 

In 1957, it change its name from Bank of British West African to Bank of West Africa.

In 1969, there was incorporated locally as the standard bank of Nigeria limited in line with the companies’ decree of 1968.  Changes in the name of the bank also occurred in 1991, to First Bank of Nigeria Limited and First Bank of Nigeria Plc respectively.

In 1985, the bank introduced a decentralized structure with five regional administrations.  This was configured in 1992 to enhance the banks operationally.  In 1996, the bank introduced the First Bank of Nigeria Century II project to revolutionize its operations in line with the dynamics of the environment.

First Bank of Nigeria got listed on the Nigeria Stock  Exchange (NSE) in March 1971 and has won various  Nigeria Stock Exchange (NSE) president’s merit award over 10 times ahead of its emergence in 2004 as the leader in Nigeria.

The bank on October 4, 2004, received two awards, namely the “Best Foreign Exchange Bank in Nigeria” and the “Best Emerging Market bank in Nigeria”, at the 2004 Annual General Meeting at International Monetary Fund (IMF) and the World Bank in Washington D.C.

According to global finance, organizer of the Washington D.C event, First Bank in a competitive selection process that involved over 15,000 organizations in 70 countries of the world.

The first bank also has a representative office in South Africa and a leader in financing the long-term development of the economy which was demonstrated in 1947, when the first long-term loan was advanced to the colonial government, to demonstrate the commitment to his customers and Nigeria economy, especially loan and advances, asset size, branches, and deposit growth-based.

Furthermore, its bank track record of profitability and reliability in sound banking has continually placed the bank in its leadership position.

In line with the mission statement Remain True to our Name by Providing the Financial Service possible”, the bank will consistently transform itself as it forges ahead in its second century of providing qualitative banking serves. 

1.9             DEFINITION OF TERMS

Fraud: Deceit or trickery deliberately practices in order to gain some advantages, dishonesty over other perpetrators: Means fraudulent parties or the fraudster’s capital flight: is the difference between total private capital outflows and the part for which interest income is identified and reported. 

Hoodwink:  Mean deceive to bad luck

Dent: Hollow left by a blow or pressure

Endemic:  Commonly found in a specified people or areas.




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