Thesis Abstract

Abstract
Banking and financial malpractices have been persistent issues in Nigeria despite regulatory efforts to curb such activities. This research aims to provide an in-depth analysis of the prevalent malpractices in the Nigerian banking and financial sector, focusing on their impact on the economy, investors, and the general public. The study employs a mixed-methods approach, combining quantitative data analysis with qualitative insights from industry experts and stakeholders. The research findings reveal that common banking malpractices in Nigeria include insider abuse, fraudulent activities, money laundering, and non-performing loans. These malpractices not only undermine the integrity of the financial system but also erode public trust in banks and other financial institutions. The impact of such malpractices is far-reaching, leading to financial instability, reduced investment inflows, and a negative perception of the Nigerian business environment. Furthermore, the study highlights the regulatory challenges faced by Nigerian authorities in combating financial malpractices, including gaps in enforcement, limited resources, and the complexity of financial crimes. Despite the existence of regulatory frameworks such as the Central Bank of Nigeria Act and the Economic and Financial Crimes Commission (EFCC), there is a need for greater collaboration among regulatory bodies, increased transparency, and stiffer penalties for offenders. In conclusion, this research underscores the urgent need for a comprehensive approach to address banking and financial malpractices in Nigeria. It recommends enhanced regulatory oversight, improved risk management practices, and increased public awareness to combat malpractices effectively. By addressing these issues, Nigeria can promote financial stability, attract foreign investment, and foster sustainable economic growth. Overall, this study contributes to the existing literature on banking malpractices in Nigeria by offering a detailed analysis of the challenges and opportunities in the financial sector. The findings provide valuable insights for policymakers, regulators, and industry stakeholders to develop strategies that promote integrity, transparency, and accountability in the Nigerian banking and financial system.

Thesis Overview

INTRODUCTION

1.1   Background of the Study

        After the implementation of the liberalization of the financial sector which was part of the Structural Adjustment Programme (SAP) introduced in 1986, the banking industry in Nigeria witnessed a tremendous growth. This was manifested in the number of banks and bank branches, their total deposits, total loans and advances, total assets and total capital and reserves during that period.

        The number of banks in Nigeria increased from 15 in 1970 to 115 as at the end of 1996. The 1996 figure was made up of 64 commercial banks and 51 merchant banks. The number of bank branches in Nigeria stood at 2,377 in 1995 and of this figure, 2,234 were commercial banks branches while 143 were merchant banks branches. The total deposit liabilities of insured banks rose from N43.9 billion in 1990 to N210.9 billion in 1995. Total loans and advances increased from N4.1 billion in 1987 to N191.2 billion in 1996. The total capital and reserves of commercial banks rose from N1.5 billion in 1987 to N10.1 billion in 1996, while total assets of banks rose from N49.8 billion in 1987toN591.2 billion in 1996.

        These monumental growth witnessed in the banking industry, brought, with them some sharp practices on the part of the operators. These sharp practices later metamorphosed into malpractices that led to the collapse of many banking institutions. By malpractice, we mean broadly an unpermissible practice or improper treatment of an issue. In other words it refers to that practice that is against the rules and regulations or is forbidden by law.

1.2   Statement of the Problem

        There is the fear that if the increasing wave of malpractices is not checked, it will pose additional threat to the stability and survival of individual banks and the performance of the industry as a whole. This is because malpractices lead to huge financial losses to banks and their customers, the depletion of shareholders’ funds and banks’ capital base, as well as loss of confidence in the banking system it also leads to the closure of some affected banks as witnessed in Nigeria and other parts of the world in recent time.

        The issue of malpractices is of special concern not only to the shareholders and depositors of banks but also the regulatory and supervisory authorities whose responsibility it is to ensure the safety and soundness of individual banks and the banking system as a whole. Accordingly, sections 39 and 40 of the NDIC Decree No. 22 of 1988 mandates insured banks in Nigeria to render to the Corporation, returns on frauds and forgeries or outright theft occurring in their organisations and reports on any staff dismissed, terminated or advised to retire on the grounds of frauds. The question of course, is how many banks appreciate the importance of this statutory requirement both for themselves and the industry as a whole? How encouraging arc banks’ response in this regard? How many banks appreciate the extent to which malpractices affect the safety of, and confidence reposed in their institutions? Records have shown that only very few banks render returns on frauds and forgeries even when such cases exist at the time of rendering their statutory returns to the regulatory authorities.