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Full Project – EFFECT OF BANK FRAUD IN NIGERIA ECONOMY

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CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Bank fraud has been a significant issue in Nigeria’s economy, affecting its growth and development. According to a study by Uche and Chukwudi (2018), bank fraud has led to a decrease in the country’s GDP, with the banking sector being the most affected. The authors argue that bank fraud has resulted in a loss of trust in the banking system, leading to a decrease in the number of people willing to invest in the sector. This has, in turn, led to a decrease in the amount of capital available for investment, slowing down economic growth.

In addition to the decrease in GDP, bank fraud has also led to an increase in the rate of unemployment in Nigeria. As banks lose money due to fraud, they are forced to cut down on their workforce, leading to an increase in the rate of unemployment (Adegbaju & Olokoyo, 2008). This has further exacerbated the economic situation in the country, as the increase in unemployment has led to a decrease in consumer spending, further slowing down economic growth.

Furthermore, bank fraud has also led to an increase in the cost of doing business in Nigeria. According to a study by Okoye and Gbegi (2013), banks have had to increase their security measures to prevent fraud, leading to an increase in their operational costs. These costs are often passed on to the customers in the form of higher banking fees, making it more expensive for businesses to operate.

However, it is not all doom and gloom. The Nigerian government has been making efforts to curb bank fraud and its effects on the economy. The establishment of the Economic and Financial Frauds Commission (EFCC) in 2003 is one such effort (Adeyemi, 2011). The EFCC has been instrumental in investigating and prosecuting cases of bank fraud, leading to a decrease in the incidence of such cases.

Despite these efforts, however, bank fraud remains a significant issue in Nigeria’s economy. According to a report by the Central Bank of Nigeria (2019), the incidence of bank fraud has been on the rise, despite the efforts by the government and the banking sector to curb it. This suggests that more needs to be done to address this issue.

1.2 STATEMENT OF THE PROBLEM

Bank fraud has been a significant issue in Nigeria’s economy, affecting its growth and development. The problem is that bank fraud leads to a loss of trust in the banking sector, which can have a detrimental effect on the economy as a whole (Adegbaju & Olokoyo, 2008). The financial losses incurred by banks due to fraud can lead to a decrease in lending, which can stifle economic growth (Nwaze, 2015).

Moreover, bank fraud can lead to a decrease in foreign investment. Foreign investors may be hesitant to invest in a country where bank fraud is prevalent, as it increases the risk associated with their investment (Uche & Chidozie, 2016). This can lead to a decrease in the amount of capital available for businesses and can hinder economic development.

Furthermore, the resources that are used to combat bank fraud could be used for other purposes that could benefit the economy. The money and time spent on investigating and prosecuting cases of bank fraud could be used for infrastructure development or education, for example (Ogbeide & Iyoha, 2017).

In addition, the prevalence of bank fraud can lead to an increase in the cost of banking services. Banks may increase fees to cover the losses incurred due to fraud, which can make banking services less accessible to the general population (Ogbeide & Iyoha, 2017).

Finally, the psychological impact of bank fraud should not be underestimated. The fear of becoming a victim of bank fraud can lead to a decrease in the use of banking services, which can have a negative impact on the economy (Nwaze, 2015).

The effect of bank fraud on Nigeria’s economy is a complex issue that requires further research and attention. The impact on trust, foreign investment, resource allocation, cost of banking services, and psychological effects are all areas that need to be explored in more depth.

1.3 OBJECTIVE OF THE STUDY

The main aim of the research work is to examine the effect of bank fraud in Nigeria economy. The specific aims and objectives of the research work are stated below as follows:

To examine the effect of bank frauds on the GDP of Nigeria
To examine the effect of bank frauds 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 Bank Fraud on the economy of Nigeria.

RESEARCH HYPOTHESES

Hypothesis 1

Ho: Bank Fraud have no significant effect on the gross domestic product of Nigeria

H1: Bank Fraud have significant effect on the gross domestic products of Nigeria

Hypothesis 2

Ho: There is no significant relationship between fraud and inflation rate in Nigeria

H1: There is significant relationship between fraud and inflation rate in Nigeria

1.5 SIGNIFICANCE OF THE STUDY

The study of the effect of bank fraud on Nigeria’s economy is of great significance for several reasons. Firstly, it provides an in-depth understanding of the extent to which bank fraud affects the economic growth and development of the country. This knowledge is crucial for policymakers and financial institutions in formulating strategies to combat this menace.

Secondly, the study sheds light on the specific sectors of the economy that are most affected by bank fraud. This information can guide targeted interventions and reforms in these sectors, thereby enhancing their productivity and contribution to the overall economy.

Thirdly, the study contributes to the existing body of literature on bank fraud and its economic implications. It provides empirical evidence from the Nigerian context, which can be useful for comparative studies and for understanding the phenomenon in similar developing economies.

Fourthly, the study’s findings can inform the design of effective regulatory frameworks and enforcement mechanisms to curb bank fraud. This can lead to improved confidence in the banking sector, which is essential for attracting investments and promoting economic growth.

Fifthly, the study can serve as a resource for educational institutions, providing insights into the real-world implications of bank fraud. This can enhance the relevance and applicability of the curriculum in fields such as economics, finance, and law.

Lastly, the study can stimulate further research on this topic, leading to more comprehensive and nuanced understandings of bank fraud and its economic effects. This can ultimately contribute to the development of more effective solutions to this persistent problem.

1.6 SCOPE AND LIMITATION OF THE STUDY

This study is primary concerned with the effect of bank fraud in Nigeria economy. This study covers 2007-2015. The researcher encountered some constraints, which limited the scope of the study. These constraints include but are not limited to the following

a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

1.7 DEFINITION OF TERMS

FRAUD: wrongful or criminal deception intended to result in financial or personal gain

BAMK FRAUDS: may involve fraud (cheques 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 product is 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.

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concerned with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and recommendations made of the study

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