The word fraud refers to the irregularities involving the use of
criminal deception to obtain an unjust or illegal advantage. It send a
wave of doubts, curiosity, anxiety and concern to people as regards the
safety of be it financial or otherwise. It exists in different sectors
of our nations economy, education, agriculture, mining, production,
However, First Bank of Nigeria Plc was founded in 1894, by a
shipping magnate from Liverpool, Sir Alfred Jones, the Bank commenced as
a small operation in the office of Elder Dumpster & company in
The Bank was incorporated as a limited liability company
on March 31, 1894 with Head office in Liverpool. It started business
under the corporate name of the Bank for British West Africa (BBWA) with
a paid – up capital of 12,000pounds sterling, after absorbing its
predecessor, the African Banking Corporation, which was established
earlier in 1892. This signaled the pre – eminent position which the Bank
was to establish in the banking industry in West Africa. In the early
years of operations, the Bank recorded an impressive growth and worked
closely with the colonial government in performing the traditional
functions of a central bank, such as issue of specie in the West African
To justify its West Africa coverage, a branch was opened I Accra,
Gold Coast (now Ghana) in 1896 and another in Freetown, Sierre Leone in
1898. These marked the genesis of the Bank’s international banking
operations. The second branch of the Bank in Nigeria was in the old
Calabar in 1900 and two years later services were extended to Northern
Currently with 339 branches spread throughout the federation, the
Bank maintains the largest branch network in the industry. The Bank
became the first financial institution in Nigeria to establish a
subsidiary bank in the United Kingdom.
Over the years, the Bank has experienced phenomenal growth. With a
share capital of N55.6 million in 1980, the Bank share capital grew to
N1.270 billion as at March 2003. the bank’s total asset base was N320.58
billion while its deposit base stood at N193.955 billion as at March
2003. Also the Bank’s market capitalization stood at N66.05 billion i.e.
N26.00k per share as at 31st March 2003.
To reposition and to take advantage of opportunities in the changing
environment, the Bank embarked on several restructuring initiatives. In
1957, it changed its name from Bank of British West Africa to Bank of
West Africa in 1969, the Bank 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 1979 and 1991, to
First Bank of Nigeria limited and First Bank of Nigeria Plc;
Apart from this, fraud in the Nigeria Banking Industry is as old as
the system itself, a retrospective analysis disclosed that between 1892
and 1952, a period commonly refer to as “free banking era” in Nigeria.
This happened when there was no form of Banking Act or Ordinance to
regulate the establishment and operations of commercial banks or a
central bank which supervises and control other banks. Within this
period expatriate and indigenous banks were established, all being
Among the banks were:
- The British Bank of West Africa in 1894. which later become the First Bank of Nigeria Plc in 1991.
- The Colonial bank in 1917 (later became Barclays Banks Dominion
Colonial and Overseas and presently the Union Bank of Nigeria Plc.
- The African continental Bank Plc in 1947
- The National Bank of Nigeria in 1933
- The Agbormagbe Bank (now called Wema Bank) in 1945 and
- Other indigenous banks that failed following introduction of banking ordinance of 1952 whose provisions they could not meet.
Some of these banks that were registered between 1892 and 1952 never
opened doors for business even for a day while some simply collected
customer’s deposit and vanished into tin air. It is a bitter truth that
those that failed were for reasons traceable to fraud; mismanagement and
lack of government patronage. The consequence was, it deprived the
individuals, organisations concerned and nation in general, funds needed
for development and increased standard of living. This resulted in a
loss of faith and trust on the banks by Nigerians and thus on impediment
for rapid development of banking operations in the country.
With the banking ordinance of 1952, some element of sanity entered
the Nigerian banking industry whish was noticed in the regulation of the
formation, operations and activities of commercial banks in the
From history to the present, fraud has remained a permanent feature, a
regular cankerworm and an infested blood in the Nigerian banking
industry and assuming greater proportion, different dimensions and
sophistication day after day. Subsequent to the first banking ordinance
in 1952 the Central Bank of Nigeria (CBN) Act of 1959 and other Acts and
ordinances with their amendments from time to time which regulated and
controlled the operations of the banking industry in Nigeria, the
occurrence of fraud could not be helped either.
Today, the era of modern banking operation with improved
communication systems, computer technology and automated electronic
gadgets and other precautionary measures by the banks, fraud has
nevertheless been on the increase with its attendant misfortunes on its
victims. Discoveries during investigations shows that banks now take
extra precautions before clearing cheque because of rampant incidents of
fraud and forgery which a bank boss placed on the average of N1 million
per working day of the year in Nigeria. Because of this precautions,
customers now waste a lot of hours in the banks before ever they were
paid their cheques; thus a defect in the quality of banks services.
These customers get tired in the midst of the waiting crowd in the bank
hall. Even with the long process of clearing, fraud could not be
terminated as those who perpetrate it are always clever devising more
sophisticated fraud scheme to circumvent the already installed measures.
It is interesting to note that the Nigerian Banking industry
comprises of the Central Bank, Commercial banks, Merchant banks,
Development banks, People’s bank and community banks. The aim of this
research work is to make an empirical examination of fraud in the
industry in general using the First Bank of Nigeria Plc Enugu. It is
hoped that whatever happened in this bank as regard to fraud also
applied to the rest of the banks in Nigeria.
1.1 STATEMENT OF THE PROBLEM
The increasing wave fraud in the banking industry is quite alarming
and sums of money lost as a result are staggering. Bank fraud has
created a lot of distrust between banks and their customers. The
Nigerian Accountant, writing on bank failure, observed that, “The
history frame work of bank failure, will not be complete without
adequate attention paid to the activities of fraudulent members of the
board and staff” This express the havoc fraud is capable of causing in
the banking industry.
The methods used in perpetrating fraud are acquiring nuclear
sophistication day – by – day. While the management of banks are busy
devising means of checking fraud, the fraudulent staff are also busy
devising new methods of duping the banks. Fraud leads to an undesired
loss of public funds and puts the integrity of the management of the
affected banks in doubts. Every incidence of fraud chops off some degree
of public confidence in the banking industry and slows down banking
habit in Nigeria.
In the light of this, if nothing positive is done to check these
incidence early enough, fraud could lead to the total crippling of the
economy as a whole and the liquidation of the banking industry in
particular. The policy Magazine, writing on “Building public confidence
in banks 2” expresses that banks should build a reputation which can
encourage their customers both existing and prospective, to transact
with enthusiasm instead of reluctance. They should shine to rebuild the
confidence of the public by satisfying its wants both functionally and
This research work is as a result concentrates purely on the
bank industry with a view to providing suitable recommendation that will
help in fraud prevention or minimization.
1.2 PURPOSE OF THE STUDY
The purpose of this research work is to carry out an empirical
examination of fraud in the Nigeria banking industry with special
reference to First Bank of Nigeria Plc. The research having identified
some of the problems on fraud in the banking industry like insecurity of
customer’s deprivation of funds for development and upliftment of
living standards, loss of public confidence on banks etc. The main
objectives amongst others for carrying out this research work includes:
- To determine if fraud exist in the Nigerian banking industry.
- To determine the causes of fraud in the banks in Nigeria
- To determine the effects of fraud in the operations of banks in Nigeria.
- To determine if there are legal loopholes system that aid fraud and
- To proffer preventive measures and strategies against fraud so as to
salvage the Nigeria banking industry as regards fraud menace.
1.3 SIGNIFICANCE OF THE STUDY
It is an undebtable fact that fraud can run the confidence people
have in the banking industry. This research work is very relevant in one
way or the other to the Nigerian banking industry in general and
particularly to the First Bank of Nigeria PLC.
Moreover, banks in Nigeria will derive great assistance from this
research work in detecting fraud in their business and subsequently
prevent or minimize them.
This they can achieve by adopting and implementing the various
suggestions and recommendations made in this study in their control
Also, this study will help readers and those may be interested in
carrying out other study serving as a reference point from time to time.
Conclusively, it cannot be over emphasized the fact that if banks
were all reduce the incidence of fraud in their operations to the lowest
level they will be operating on a more profitable ground. The public
confidence on banks will once more be restored and economic revival
1.4 STATEMENT OF HYPOTHESIS
In carrying out this research work, the following hypothesis were
formulated to enable the research test the validity of the information
to be obtained.
Ho: Nigeria banking industry has not experienced many cases of fraudulent practices.
Hi: Nigeria Banking industry has experienced many cases of fraudulent practices.
Ho: The rate of fraudulent mal-practices in the Nigeria banking industry has been minimized.
1.5 SCOPE AND LIMITATIONS OF THE STUDY
This research work would have been to investigate fraud in all the
commercial banks, people’s bank, Merchant Banks, Development Banks and
Community Banks in the country for the sake of excellence and
achievement of best possible results. As this would be a large
population and likely to pose some problems, the research work is
therefore centered on one bank of interest. The First Bank of Nigeria
Plc. Representing the commercial banks.
The researcher encounter the following problems;
- Financial constraint: Finance to a large extent determines the
success which a venture can be. For this research work, financial
constraint was responsible for the inability to distribute
questionnaires throughout the branches of the bank and so reliance was
made on the information at their main office.
- The less than fair co-operation on the part of the bank official in
supplying the needed information and data posed its own problem. Most of
the bank managers refused to offer past records on fraud or the amount
involved. They bluntly refused saying they are confidential.
- Other bank will know their weakness
- There customers both present and the investors would lose confidence on them.
- Other banks would use this fraud element against their operations.
In spite of the assurance of strict confidence of any information or
data supplied and that it would be use purely for academic pursuit, they
still refused. This made the researcher to give up the idea of asking
questions which the manager regarded as sensitive. In addition to this,
in framing the questionnaire, the researcher avoid such direct questions
that require exact figures.
- Another question was the not on seat and too busy to attend to you
syndromes which the researcher suffered. The researcher made several
visits, and at times, even on appointment suffered this problem.
- Distance and time: The bank’s branches were not near and the
academic period was too short. And period was split between the class
work and research work which compounded the problem. The researcher in
the face of these problem was able to make the work sound and reliable.
1.6 DEFINITION OF TERMS
The meanings and interpretations given to most of the term used in this research work are defined below
1 Bank : this is the store _house of a nations economy; a place where money and other valuable are kept for safe custody.
Ii Commercial Bank: There are bank that accept deposits, provides
commercial credits to their customers which involves the creation,
distribution and transfer of deposits.
Iii Internal control system: This is the whole system of control,
financial and other wise, established by the management in order to
carry on the business of the enterprise in an order and efficient
manner, ensure adherence to management policies, safe guard the
completeness and accuracy of the records