ABSTRACT

Fraud means an 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 a swindle. By extension, Fraud include 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 other operator independently or in conjunction with others inside or outside the bank.

This research work is centered on prevention control and Effect 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 significant of study, problem and justification of research, historical background of business, major hypothesis, scope and limitation of the study.

The second chapter involve 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.

The chapter three is Research Methodology and chapter four is the analysis and interpretation of date and testing hypothesis.

The chapter four also emphasize basically on past presentation, analysis and discussion of findings.

Finally, chapter five is the end of the chapter which emphasis on project, summary, recommendation with be drawn as to highlighted, conclusion shall be drawn as to whether fraud has effect on the Nigeria economy or not. To sum it up, recommendation 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

CHAPTER ONE

1.0                       Introduction                                                                           1

1.1       Background of the Study                                                      3

1.2       Statement of the Problems                                                   5

1.3       Objective of the Study                                                           5

1.4       Significance of the Study                                                      5

1.5       Scope of the Study                                                                6

1.6       Limitation of the study                                                         6

1.7       Hypothesis                                                                             6

1.8       Background of the Fist 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 the 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

CHAPTER ONE

1.0             INTRODUCTION

Historically, there are records to show that indirectly, banking activities started in Nigeria about 1861 when shipping company ELDER DEMSTER LINE started objective of making easier transaction 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 DEMSTER.

It open 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 number of banks Nigeria is still developing, it is true, however that the number of bank 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, labour 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 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 economic development of a nation.

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

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

Bank support local economic by mobilizing funds from the surplus sector to 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 witness a tremendous growth from a few indigenous banks in the 50’s to one hundred in the 90’s.  There had been great diversification in the banking industry as most Merchant Banks now have license to practices universal banking.  

It is widely recognized that the responsibility of banks are multifarious and sometime conflicting as interest of many parties regarding the activities of banks of variance.  Depositors expect maximum liquidity and highest return for their deposit, borrower 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 single bank will have more micro and macro impact on the institution in other industries as a result banks should synchronize these conflicting interest  and they cannot afford to fail.

Infact, some banks failed even before they open for business, what kept many  bank 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 eradicate, the incidence of fraud in banks, the federal government of Nigeria had promulgate the advance fee fraud and other offences decree in 1995 whereby a failed bank tribunal was set up to prosecute offenders as regards financial malpractices within the banking sector.

1.1             BACKGROUND OF THE STUDY

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

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

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

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

Fraud is define as “the cut of depriving the resources or fund or asset of a bank or a person to 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.  sometime, it occur between two department in a bank.  When fraud occur in a bank on a continual basis, banks become unable to meet their daily financial obligation and when this occur frequently the banks are force to declare themselves distressed. 

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

According to section 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 advice to retire on the ground of fraud practices.  Record have shown that only 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 Nigeria banks today assume an endemic dimension as government official 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 bank, it is useful to identify the commonest cause of bank fraud and this will lead to the provision of control measures which surfaces as the research progress.

1.2             STATEMENT OF THE PROBLEM

The sub-optimal performance of the Nigeria banking industry is due to an array of problem of these problems, the issue of fraud in our banks is one bank 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 level of customer’s confidence as previous study on bank fraud clearly shown, it means that customers have tendency to base their choice and patronage of banks on the extent to which the bank is free of fraudulent practice.

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

1.3             OBJECTIVES OF THE STUDY

The basic objectives of this study are:

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

1.4             SIGNIFICANCE OF THE STUDY

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 of fraud that existing in their company.

The significance of this study to 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 Nigeria economy will be 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.

1.6             LIMITATIONS OF THE STUDY

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 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 bank has effect on the Nigeria economy

H1:  The fraud in bank does not have effect on the Nigeria economy.

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

H3:     The fraud in bank does not have effect on customer.

1.8             BACKGROUND OF THE FIRST BANK PLC

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 economy 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 commence as a small operation in the office of ELDER DEMSTER and company on March 31, 1894 with head office in Liverpool.  “Bank of British West African (BBWA)”

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

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

First Bank Plc has diversified into wide range of banking activities and service, this include corporate and retail banking, registrarship, trusteeship and insurance brokerage, especially electronic banking system.  Over the years, the banks experienced several restructuring initiatives, reposition and to 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 operational.  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 award, 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 the Washington D.C event, First Bank in a competitive selective process that involved  over 15,000 organization in 70 countries of  the world.

First bank also have representative office in South Africa and a leader in financing 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 it 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 different 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.