CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF STUDY
Nigeria is one among the African nations that are plague with fraud
and financial crimes and these have had effect on the economy of
Nigeria. These crimes, be it economic or financial crimes or both have a
kind of devastating effect on the economy, the security, socio economic
development and social wellbeing of the citizens of Nigeria. Although
it may be pertinent to highlight that as modern financial system
encourages and also facilitates local and international commerce.
Financial are also enhanced by modern financial global liberalization so
as to transfer millions of dollars globally as a fast rate through the
availability of good information and communication infrastructure such
as the internet, e-money transfer etc.
It is evident that money laundering among other forms of economic and
financial crime requires the existing financial system and operation
for it efficiency in operation. In Nigeria today, money is laundered
through currency exchange houses, the Nigeria stock brokerage houses,
casinos, automobile dealership and other trading companies. These groups
of institutions are more than capable of masking proceeds from most
illegal criminal activities.
According to (Ribadu, 2004) stated that the overall effect of these
activities on the socio-political lives and economic wellbeing of the
people of most of the developing countries and Nigeria for instance
could be well imagined.
In most of the developed economics of the west, it is evident that
the criminal manipulation of company balance sheets created a more
favourable picture about their finances than was the reality.
In Nigeria for instance, Lagos state government funds were once
trapped while in the US there were crises in the management of
mortgages which were inflated. It was then a boom and most investors
made a lot of fortune on their mortgage investments as a result of these
most people in the US and financial institutions started financing
their mortgage with hope to make profit which later proves unrealistic
and unsustainable. The ongoing issue caused series of default in
payments leading to foreclosures that caused chaos, doom and gloom in
housing market. We all know that the world is a global village,
investors in the business were world-wide; the financial crises in the
US have a significant effect on the world economy.
The most common fraud in Nigeria is bank frauds and fraud in most of
the government agencies. the recent times includes: Fraudulent transfer
and withdrawals; Use of unauthorized overdraft;; Posting of fictitious
credits; Presentation of forged cheques; Conversion of banks money into
personal use; Granting of unauthorized loans; Abuse of medical scheme;
Insider abuse; Illegal conversion of pension funds in various agencies
and ministries; Ghost workers fraud resulting into millions of naira
paid into private pockets; Abuse of political office leading to
contract over billings and over invoicing.
According to Commer (2008) stated that that motivations for corporate
fraud include: Personal greed; Possibility of getting away; Low
prosecution rate; societal pressures; Opportunity; Staff morale problems
and Anti-institutional posture.
However, Nigerian government like many other governments of
developing countries until recently has been very slow in putting in
place strict policy measures and legislative framework in combating the
effects of economic and financial crimes. It is to this regard that the
researcher wishes to carry out a research on the effect of fraud and
financial crimes on the economy of Nigeria.
1.2 STATEMENT OF PROBLEM
What instigated the study is due to the Nigerian experience on the
issue of fraud and other financial crimes and the overall effect on the
economy of Nigeria. There have being a growing concern about the way the
country’s resources are being managed, especially the oil and the
revenue generated from oil, reason being that the oil produced does not
comply with the relevant provision. According to the Nigeria 1999
constitution section 162 stated that the internally generated revenue
(IGR) of the federal government of Nigeria must be deposited into the
federal account but the operation of the excess crude account tend to
violate this provision. Another major issue apart from the mismanagement
of the excess crude account, there are worries about the revenues from
the sales of gases.
According to Falana (2010) stated that facts have continued to emerge
daily on huge sums of money that may have being looted,
misappropriated, shared, mismanaged or committed into the so called
white elephant project. It is kind of worrisome to observe that the
highest level of this profligacy and continuous irregularities by all
tiers of government in the management of the country’s resources and
wealth of the nation.
1.3 AIMS AND PBJECTIVES OF STUDY
The main aim of the research work is to examine the effect of fraud
and financial crimes on the economy of Nigeria. The specific aims and
objectives of the research work are stated below as follows:
- To examine the effect of fraud and financial crimes on the GDP of Nigeria
- To examine the effect of fraud and financial crimes on inflation rate in Nigeria
- To examine the relationship between the rate of inflation and the gross domestic products of Nigeria
- To proffer solution to the negative effect of fraud and financial crime on the economy of Nigeria
1.4 RESEARCH QUESTIONS
The study came up with the following research questions so as to be
able to achieve the above objectives. The specific research questions
include the following:
- What is the effect of fraud and financial crimes on the GDP of Nigeria?
- What is the effect of fraud and financial crimes on inflation rate in Nigeria?
- What is the relationship between the rate of inflation and the gross domestic products of Nigeria?
1.5 STATEMENT OF RESEARCH HYPOTHESIS
Hypothesis 1
H0: Fraud and inflation have no significant effect on the gross domestic product of Nigeria
H1: Fraud and inflation have significant effect on the gross domestic products of Nigeria
Hypothesis 2
H0: There is no significant relationship between fraud and inflation rate in Nigeria
H1: There is significant relationship between fraud and inflation rate in Nigeria
1.6 SIGNIFICANCE OF STUDY
The study will be of immense benefit to both the state and the
federal government of Nigeria, the study will also benefit the oil and
the non-oil sector of the Nigeria economy in policy generation and
decision making as it will reveal the effect of fraud and financial
crimes on the economy of Nigeria. Finally the study will be of great
guide to other researchers that want to carry out similar research on
the effect on the effect of fraud and financial crimes on the economy of
Nigeria.
1.7 SCOPE OF STUDY
The research work will cover the effect of fraud and financial crimes
on the economy of Nigeria from the year 2007 to the year 2015
1.8 LIMITATIONS OF STUDY
FINANCIAL CONSTRAINT- Insufficient fund tends to
impede the efficiency of the researcher in sourcing for the relevant
materials, literature or information and in the process of data
collection (internet, questionnaire and interview).
TIME CONSTRAINT- The researcher will simultaneously
engage in this study with other academic work. This consequently will
cut down on the time devoted for the research work
1.9 DEFINITION OF TERMS
FRAUD:wrongful or criminal deception intended to result in financial or personal gain
FINANCIAL CRIMES:may involve fraud (cheque fraud,
credit card fraud, mortgage fraud, medical fraud, corporate fraud,
securities fraud (including insider trading), bank fraud, insurance
fraud, market manipulation, payment (point of sale) fraud, health care
fraud); theft; scams or confidence tricks; tax evasion; bribery
GDP:The gross domestic productis one of the primary
indicators used to gauge the health of a country's economy. It
represents the total dollar value of all goods and services produced
over a specific time period; you can think of it as the size of the
economy
INFLATION:Inflation is the rate at which the general
level of prices for goods and services is rising and, consequently, the
purchasing power of currency is falling. Central banks attempt to
limit inflation, and avoid deflation, in order to keep the economy
running smoothly