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Effects of Fraudulent Practice on Profitability Performance of Nigeria Banks A Case Study of UBA Bank PLC in Nigeria

Effects of Fraudulent Practice on Profitability Performance of Nigeria Banks

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Reference ID: PS-117-TM


This research material titled “Effects of Fraudulent Practice on Profitability Performance of Nigeria Banks” is dedicated to God for his enabling grace, and to all computer enthusiasts who contributed to make life a pleasant experience during my research documentation.


I extend my sincere gratitude to all those who contributed to the completion of this project. Special thanks to my Supervisor (Name of your Supervisor), the Head of Department (Name of your HOD), the Lecturers in the department of Accountancy / Accounting, Book Authors and Profound Scholars of existing or related project material on “Effects of Fraudulent Practice on Profitability Performance of Nigeria Banks” for their invaluable guidance, support, and expertise throughout the journey.

I am also grateful to your study area (mention any funding organizations, if applicable) for their financial assistance. This research would not have been possible without the encouragement and assistance of some stakeholders (mention any mentors, teachers, or colleagues). Additionally, I would like to acknowledge the understanding and patience of my family and friends during this endeavor. Your unwavering support has been a constant source of motivation. Thank you all for being part of this meaningful endeavor.

Effects of Fraudulent Practice on Profitability Performance of Nigeria Banks (A Case Study of UBA Bank PLC in Nigeria)





  • 1.1 Introduction
  • 1.2 Background of Study
  • 1.3 Statement of Problems
  • 1.4 Aim and Objectives of Study
  • 1.5 Research Questions
  • 1.6 Research Hypothesis
  • 1.7 Significance of Study
  • 1.8 Scope of the Study
  • 1.9 Limitations of the Study
  • 1.10 Definition of Terms



  • 2.1 Introduction
  • 2.2 Conceptual Review of Fraud
  • 2.3 Categories of Fraud
  • 2.4 Methods through which Perpetrator uses to Defraud Bank
  • 2.5 The Role of the Branch Manager on Frauds
  • 2.6 Forms of Fraud
  • 2.7 Effects of fraudulent practice in Bank (UBA Bank PLC)
  • 2.8 Reason of Committing Frauds
  • 2.9 Techniques of fraud Control in Bank
  • 2.10 Theoretical Framework
  • 2.11 Empirical Review



  • 3.1 Introduction
  • 3.2 Research Design
  • 3.3 Population of Study
  • 3.4 Sampling and Sampling Technique
  • 3.5 Validation of Research Instrument
  • 3.6 Method of Data Collection
  • 3.7 Method of Data Analysis
  • 3.8 Questionnaire
  • 3.8.1 Interview
  • 3.8.2 Key Informants Interview
  • 3.8.3 Observation
  • 3.9 Ethical Consideration
  • 3.10 Statistical Analysis



  • 4.1 Introduction
  • 4.2 Presentation and Analysis of Data
  • 4.3 Test of Hypothesis 1
  • 4.4 Test of Hypothesis 2
  • 4.5 Test of Hypothesis 3
  • 4.6 Discussion of Findings



  • 5.1 Introduction
  • 5.2 Summary
  • 5.3 Conclusion
  • 5.4 Recommendation




Fraud is an intentionally deceptive action designed to provide the perpetrator with an unlawful gain or to deny a right to a victim. This study was carried out in order to find out fraudulent practice and its effects on performance of Nigeria Banks. UBA Bank PLC of Nigeria, Nekede Owerri was use as the case study. The study aimed at exposing the way which fraudsters use in defrauding these banks. However, fraud is the crime or an act of deceiving somebody in order to get money or goods illegally. Fraud may continue as long as it is not possible to read human minds and as long as a social and economic injustice remains. The research design used in this report is descriptive design, utilizing questionnaire method to obtain information from the respondents for this project. A total of 150 (one hundred and fifty) respondents were selected for this study to represent the entire population of the study. For null hypotheses were formulated and tested using the one-way ANOVA and the t-test statistical tools at zero point zero five (0.05) level of significance. Primary data were collected from the primary source which questionnaire was used as an instrument of data collection while secondary data were sources from textbooks, journals, newspapers and the internet were employed. The data were presented on a frequency distribution table and analyzed using simple percentage, while hypothesis was tested using chi-square test. The importance of this study cannot be over emphasized; it will be relevant to the management of the banking industry, as findings from it will help the bank on how to adopt some control measure to check the high incidence of fraud facing them in operation. The researcher recommended that Banks should endeavor to organize seminars and workshop on fraud detection and control for their employee regularly and during induction class and also not to allow Staff to stay on one function for long a period; they should be periodically rotated in order to avoid the possibility of exploring existing operational loopholes and short comings for personal gains.

Effects of Fraudulent Practice on Profitability Performance of Nigeria Banks (A Case Study of UBA Bank PLC in Nigeria)


1.1 Introduction

Fraud is an intentionally deceptive action designed to provide the perpetrator with an unlawful gain or to deny a right to a victim. Types of fraud include tax fraud, credit card fraud, wire fraud, securities fraud, and bankruptcy fraud. Fraudulent activity can be carried out by one individual, multiple individuals or a business firm as a whole (Investopedia, 2021). Fraud has been classified in various ways and using various parameters. However for the purpose of this research work, we shall employ the perpetrators criteria stated by Adeyemo (2012). Experience has shown that most of such fraud is perpetrated by internal staff or by outsider who act in collusion with bank staff. These bank employees release the specimen signature of the customers being forged (Nwaze, 2008).

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.

1.2 Background of Study

Fraud involves the use of deception to obtain an unjust or illegal financial advantage; or intentional misstatement in, or omission of amounts or disclosure from an entity's accounting records in financial statements; or it is generally refer to an act of course of deception deliberately practiced to gain advantage, such deception as directed at the detriment of another. It suggest unfair dealing which could be perpetrated against the bank by its customers or by bank officer or by other interest groups.

Fraud may be a sole venture or a joint venture ( i. e one person or compromising more than a person). It may be short term fraud. Fraud may also be classified as actual or constructive frauds.

Actual fraud is defined as consisting of false statements made knowingly or without belief in their truth, or recklessly without caring whether they are true or false, with the intent that they be acted upon which are acted upon, to the detriment of persons or organizations that so acted.

Constructive fraud includes acts of undue influence, abuse of confidence, abuse of trust or misuse of office to gain undue advantages at the expense of other persons. It has been opened that there is no fraud without misrepresentation and a fraudulent misrepresentation makes a person or an organization liable for willful or reckless act of falsehood.

Fraud can be described as cancerous premeditated action of a person or group of persons with intentions of attending the truth of fact for selfish monetary gain. It involves the use of descent and trick and sometime highly intelligent carrying and knows how. The action usually takes the form of forgery, falsification of documents, forgery of signature and outright theft.

Employees as well as clients of firms in all industries engaged in fraudulent practices all over the world, although the existence of frauds in our banks is not an uncommon or unexpected phenomena's, it is worrisome because of all the various problems confronting the banking industry, which of fraud is easily the most intractable. The banking industry worries more about fraud, consequences act on health and for the existence of the institutions. Fraud in banks nearly always leads to loss of money, mockers that ordinarily belong to someone other than the banks. The loss result in some cases reduced level of resources available for the use in the operations of the banks. According to the Nigerian Deposit Insurance Corporations (NDIC) annual report (2002) shows that 707 cases of fraud was reported in commercial banks and the amount involved was N12,919.55 million.

In every bad cases where fraud occur with crippling frequency and in wholesales sizes, the bank may found to close down as size a result of banks losing their money and it is wound up, the customers as well losses their money and documents. This lead to loss of confidence in the banks an reduces patronage, in our kind of financial environment where banking habits is being encouraged this cools results in a major set-banks for the efforts.

The nature and extent of fraud and other irregularities are influenced by societal values, norms and practices. That is why Opara (1990) concludes that the traditional Africa society was almost fraud free. This was because there were entrenched societal norms and values which no respectable member of the society would treat with disdain without incurring the wrath of the society or “gods”. At our time, the society is not helping matters in the wave of fraud and crimes, since criminals and fraudulent well-to-do persons are conferred with chieftaincy titles or made traditional rulers. In families, parents compare their sons and daughters with their mates whom they described as “well to do without any attempt at knowing what these persons do or where they started. They are not concerned with the so called progress of other person asking their words; “are these persons building houses, buying cars, marrying wives not your mates? It will be right to infer that our society at present, fraudulent and a society cannot produce a better individuals and leaders than it is.

Fraudulent practice and its effects on performance of Nigerians banks is therefore of special concern to the monetary control and supervising authorities who are charge with safety of individual banks and the soundness of the banking industry.

Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Effects of Fraudulent Practice On Profitability Performance Of Nigeria Banks.

1.3 Statement of Problems

Banks operate on the pivot of public confidence and trust on the ability of bank to deliver services as at when demanded. The Nigeria society is bedeviled with the desire to get rich so as to feel important as Nigeria believed that wealth is the measure of power and importance. It is the realization of this fact that these “get rich quick” syndrome of people that made them to direct their attention on defrauding the banks.

Frequency occurrence of frauds untimely distracts the attention of the management and leads to increase running cost, time and energy that would have been spent in improving customers service, should be expanded on preventing fraud. Monies that would have also gone into service improvement activities should be expanded in setting fraud controls procedures and systems.

There are two main sources of frauds in banks the internal and external sources though distinguishable in theory these sources are very often not separately in practice. That is to say a successful often takes place and succeeds as a result of the collaboration, international or error of judgment of an insider banks employees. Indeed it was recently affirmed that “the public believed that most fraud in banks are with the active communication of bank staff. Otherwise, how does one explains for example, how a cheque drawn in favor of Nigeria is paid in some private accounts?

Fraud has caused the loss of whopping amount of money contributed to the liquidation of several banks and consequently unemployment beset the acute problem of the discovering of the fraudulent practice in the Nigeria banks.

1.4 Aim and Objectives of Study

The aim of the study is to find out the Effects of Fraudulent Practice On Profitability Performance Of Nigeria Banks. In achieving this aim, the following specific objectives were laid out as follows:

  1. To find out how bank staffs can help in preventing fraud.
  2. To find out why people commit banks fraud
  3. To discover ways of checking bank fraud.

What banks should aim at towards frauds

  1. To find out whether bank fraud can be reduced.
  2. To devise means of preventing fraud rather than detection and rigorous investigations

1.5 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

  • To what extent does fraud affects the profit level of banks?
  • How does fraud affect capital base of banks?
  • To what extent has fraud affected the liquidity position of banks?
  • What is the rate of fraudulent practice in your bank?
  • Why do people commit banks fraud?
  • What are the means of preventing fraud?

1.6 Research Hypothesis

In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.

Hypothesis One

  • H0: Bank fraud has not in any way affected the profit level of bank.
  • H1: Bank fraud has affected the profit level of banks.

Hypothesis Two

  • H0: Bank fraud does not affect the capital base of banks.
  • H1: The capitals base of the banks has been affected by bank fraud.

Hypothesis Three

  • H0: Fraud has not affected the liquidity position of banks.
  • H1: Liquidity position of banks is affected by bank fraud.

1.7 Significance of Study

The importance of this study cannot be over emphasized, it will be relevant to the management of the banking industry, as findings from it will help the bank on how to adopts some control measure to check the high incidence of fraud facing them in operation.

More so, it will be of immense importance to the researcher to update the work in terms of current changes in the banking sector.

This research will also be of a great help to shareholders, investors, depositors, customers, and the government at large.

Also, it will be of special concern to the monitory, regulatory and supervisory authority that is charged with the safety of individual banks and the soundness of the banking system.

In addition, it will be of immense value to the managements whose primary responsibilities is prevention and detection of properties, also charged with judiciary role of safeguarding assets since the directors of a companies or anybody in their place are regarded in law as activities stewardship capacity concerning the property which is under their control. It is the responsibility of management to ensure that the operations of the organization are conducted in accordance with all relevant legal obligations.

Lastly, it is of urgent need that auditors whose responsibility is primarily not to seek frauds, error and defalcation but to express an opinion on the financial statements of an enterprise, since irregularities and error by their nature affect the accounting records or financial statement, the auditor's responsibility towards irregularities and errors is to design his works so that he may have a reasonable expectation of detecting those which may impair the truth and fairness of the statements.

1.8 Scope of the Study

In this case, the study focuses on fraudulent practices and its effect on the performance of Nigeria banks using UBA Bank as a case study. The incidence of fraud and forgeries could lead to the closure of some affected banks as it had happened in some parts of the world including Nigeria. If not arrested might pose certain threats to the stability and survival of individual banks and the performance of the fraudulent banks as a whole. It will also cover fraudulent practices in Access bank and the amount involved.

1.9 Limitations of the Study

During the course of this study, many things militated against its completion, some of which are:

  1. Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
  2. Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this project work. There were lots of information needed from the staffs of this establishment to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
  3. Research material: availability of research material is a major setback to the scope of the study.
  4. Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
  5. 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).

1.10 Definition of Term

Fraud: This is defined as a wrongful or criminal deception intended to result in financial or personal goods. In legal storms, it is a false representation of a matter of fact whether by words or by false or misleading allegation. It can also be defined as a deception deliberately practiced in order to secure unfair or unlawful gain.

Practice: It is something done often, it is also something that people do often in a particular way.

Fraudulent Practices: It is the method by which people engage in an act.

Deception: It is a trick intended to make somebody believe something that is not true.

Perpetrators: It means a person who commits a crime or does something that is wrong or evil.

Subtle: It means believing in a clever way and using indirect method in order to achieve something.

Deceipt: It means dishonest behaviours that is intended to make somebody believe something that is not true

Embezzle: To steal money which belong to another persons or your employer.

Actual Fraud: False statements made knowingly or without belief in their truth.

Constructive Fraud: Acts of undue influences abuse of confidence, abuse of trust or misuse of office to gain undue advantage at the expense of other persons.

Forgery: It is the act of the forgeing a customer's signature to draw money fraudulently.

Defalcation: Is the act of alteration of depositor’s agents with the intentions to steal another person's money.

False Document: A document that contains or seems to be real to deceive people

Deliberate: Something done on purpose rather by an accident

Fraud Men: It refers to those who are professionally habited to defrauding people of their legally acquired property or money.


2.0 Literature Review

2.1 Introduction

This chapter focuses on the review of related literature. A literature review includes the current knowledge as well as theoretical and methodological contributions to a particular topic. It documents the state of the art with respect to the topic you are writing. It surveys the literature in the topic selected. In this research work the literature review includes the …

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