Assessment Of The Effect Of Fraud On The Financial Performance Of Nigerian Banks

The wave of fraud in Nigerian banks has continued to be on the rise. There were 20,768 reported cases of fraud and forgery (attempted and successful) valued at N19.77 billion in 2018, compared with 16,762 cases, involving N5.52 billion and US$ 0.12 million in the period of 2017. The amount lost to fraud and forgeries in the first six months of 2018 total N12.06 billion, compared with the N0.78 billion and US$0.03 million suffered in the first half of the year 2017. This study therefore, sought to investigate the effect of fraud on the financial performance of banks in Nigeria. The secondary data on Total Amount of Bank Fraud (TABF), Percent of Expected Loss to Amount of Bank Fraud (BFRD), Foreign Exchange Malpractices (FEM), Return on Assets (ROA) and Return on Equity (ROE) spanning the period 2008-2018 utilized in the study were extracted from the CBN and the NDIC Statistical Bulletins. To determine the effect of fraud on financial performance, the multivariate regression model was employed. However, the analyses were done via windows software – STATA 13.0 version. The findings showed that TABF and FEM significantly affects the reported figures for RETOA and RETOE. However, BFRD does not have effect on the RETOA and RETOE of banks in Nigeria. Thus, the study concludes that fraud significantly and negatively influences financial performance of banks in Nigeria. Based on the findings, the study recommends among others, that in order to improve on the Return on Asset (ROA) and Return on Equity (ROE), Nigerian banks should strengthen and institute effective and efficient internal control in recording, processing and authorization of business financial transactions that would mitigate the incidence of fraud.

  • Authors Name: Inaya, L. S., Obasuyi, P. E. (2020)

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