FRAUD AND PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA 2012 – 2024

Abstract

This study examines the effect of fraud on the performance of Deposit Money Banks (DMBs) in Nigeria from 2012 to 2024. Data on Return on Assets (ROA), Return on Equity (ROE), Number of Fraud Cases (NFC), Amount Involved in Fraud (AIF) and Actual Loss to Fraud (ALF) were sourced from NDIC, CBN and FITC reports. Descriptive statistics, Augmented Dickey-Fuller unit root test, Granger causality test and Ordinary Least Squares (OLS) multiple regression were employed. The descriptive result shows fraud cases rose from 3,786 to 101,801 with average actual loss of N11.38 billion. The regression result shows R-squared of 0.84 for ROA, indicating fraud explains 84% of performance variation. All fraud proxies have negative effects, but Actual Loss to Fraud has the most damaging and significant effect with coefficients of -0.0892 for ROA (p=0.0009). The Granger causality result shows unidirectional causality from fraud to performance, while poor performance does not cause fraud. The study concludes that fraud significantly reduces bank performance and actual loss is the main driver. It recommends DMBs deploy AI-powered real-time fraud monitoring and recovery systems to minimize actual loss.