AN EVALUATION OF THE IMPACTS OF FRAUD AND RELATED FINANCIAL CRIMES ON THE NIGERIAN ECONOMY

CHAPTER ONE

INTRODUCTION

1.1              BACKGROUND OF THE STUDY

Nigeria is one among the African nations that are plague with fraud and financial crimes and these have had effect on the economy of Nigeria. These crimes, be it economic or financial crimes or both have a kind of devastating effect on the economy, the security, socio economic development and social wellbeing of the citizens of Nigeria. Although it may be pertinent to highlight that as modern financial system encourages and also facilitates local and international commerce. Financial are also enhanced by modern financial global liberalization so as to transfer millions of dollars globally as a fast rate through the availability of good information and communication infrastructure such as the internet, e-money transfer etc.

It is evident that money laundering among other forms of economic and financial crime requires the existing financial system and operation for it efficiency in operation. In Nigeria today, money is laundered through currency exchange houses, the Nigeria stock brokerage houses, casinos, automobile dealership and other trading companies. These groups of institutions are more than capable of masking proceeds from most illegal criminal activities.

According to (Ribadu, 2004) stated that the overall effect of these activities on the socio-political lives and economic wellbeing of the people of most of the developing countries and Nigeria for instance could be well imagined. In most of the developed economics of the west, it is evident that the criminal manipulation of company balance sheets created a more favourable picture about their finances than was the reality.

In Nigeria for instance, Lagos state government funds were once trapped while in the US there were crises in the management of mortgages which were inflated. It was then a boom and most investors made a lot of fortune on their mortgage investments as a result of these most people in the US and financial institutions started financing their mortgage with hope to make profit which later proves unrealistic and unsustainable. The ongoing issue caused series of default in payments leading to foreclosures that caused chaos, doom and gloom in housing market. We all know that the world is a global village, investors in the business were world-wide; the financial crises in the US have a significant effect on the world economy.

The most common fraud in Nigeria is bank frauds and fraud in most of the government agencies. the recent times includes: Fraudulent transfer and withdrawals; Use of unauthorized overdraft;;  Posting of fictitious credits; Presentation of forged cheques; Conversion of banks money into personal use; Granting of unauthorized loans; Abuse of medical scheme; Insider abuse; Illegal conversion of pension funds in various agencies and ministries; Ghost workers fraud resulting into millions of naira paid into private pockets; Abuse of political office leading to contract  over billings and over invoicing.

According to Commer (2008) stated that that motivations for corporate fraud include: Personal greed; Possibility of getting away; Low prosecution rate; societal pressures; Opportunity; Staff morale problems and Anti-institutional posture.

However, Nigerian government like many other governments of developing countries until recently has been very slow in putting in place strict policy measures and legislative framework in combating the effects of economic and financial crimes. It is to this regard that the researcher wishes to carry out a research on the effect of fraud and financial crimes on the economy of Nigeria.

1.2              STATEMENT OF THE PROBLEM

What instigated the study is due to the Nigerian experience on the issue of fraud and other financial crimes and the overall effect on the economy of Nigeria. There have being a growing concern about the way the country’s resources are being managed, especially the oil and the revenue generated from oil, reason being that the oil produced does not comply with the relevant provision. According to the Nigeria 1999 constitution section 162 stated that the internally generated revenue (IGR) of the federal government of Nigeria must be deposited into the federal account but the operation of the excess crude account tend to violate this provision. Another major issue apart from the mismanagement of the excess crude account, there are worries about the revenues from the sales of gases.

According to Falana (2010) stated that facts have continued to emerge daily on huge sums of money that may have being looted, misappropriated, shared, mismanaged or committed into the so called white elephant project. It is kind of worrisome to observe that the highest level of this profligacy and continuous irregularities by all tiers of government in the management of the country’s resources and wealth of the nation.

1.3              OBJECTIVE OF THE STUDY

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

1.   To examine the effect of fraud and financial crimes on the GDP of Nigeria

2.   To examine the effect of fraud and financial crimes on inflation rate in Nigeria.

3.   To examine the relationship between the rate of inflation and the gross domestic products of Nigeria.

4.   To proffer solution to the negative effect of fraud and financial crime on the economy of Nigeria.

1.4              RESEARCH HYPOTHESES

Hypothesis 1

Ho: Fraud and financial crime have no significant effect on the gross domestic product of Nigeria

H1: Fraud and financial crime 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 will be of immense benefit to both the state and the federal government of Nigeria, the study will also benefit the oil and the non-oil sector of the Nigeria economy in policy generation and decision making as it will reveal the effect of fraud and financial crimes on the economy of Nigeria. Finally the study will be of great guide to other researchers that want to carry out similar research on the effect on the effect of fraud and financial crimes on the economy of Nigeria.

 1.6 SCOPE AND LIMITATION OF THE STUDY

This study is primary concerned with the effect of fraud and financial crimes on the economy of Nigeria. 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

FINANCIAL CRIMES: 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.