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Banks Suffer Fraud Cases Worth N16.5bn in Three Years

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Godwin Emefiele CBN - Investors King
  • Banks Suffer Fraud Cases Worth N16.5bn in Three Years

The banking sector recorded 31,736 fraud cases involving the sum of N16.5bn between January 2014 and December 2016, figures obtained by our correspondent from the Central Bank of Nigeria have revealed.

The fraud statistics are contained in the Nigerian Electronic Fraud Report, which was prepared by the Banking and Systems Payment Department of the CBN.

The frauds were perpetrated through various payment channels in the banking sector such as Across the Counter, Automated Teller Machines, cheques and electronic-commerce platforms.

Others are Internet banking, mobile banking, Point-of-Sale and web transactions.

The report stated that in the last three years, there had been more attempts in the number of fraud cases, adding that the development might be linked to the economic hardship being experienced in the country.

For instance, the report stated that the volume of fraud cases rose by 635.3 per cent from 1,461 incidents in 2014 to 10,743 in 2015.

Between 2015 and 2016, the report stated that the incidents of fraud rose by 81.8 per cent from 10,743 to 19,532 cases.

Cumulatively, the incidence of fraud rose by 1,236 per cent during the three-year period.

In monetary terms, an analysis of the report showed that while there had been an increase in fraud volume, the rate of increase could not be achieved financially.

For instance, the report stated that in 2014, out of the total transaction value of N43.85tn in the banking sector, about N7.75bn was fraud-related.

However, it noted that while the transaction volume rose from N43.85tn in 2014 to N48.93tn in 2015, the amount involved in fraud-related transactions declined by N3.38bn or 43.6 per cent from N7.75bn to N4.37bn.

Between 2015 and 2016, the report stated that while the value of financial transactions rose significantly from N48.93tn to N64.18tn, the amount of fraud involved during the period dropped marginally from N4.37bn to N4.36bn.

The report read in part, “Although, values of the year 2016 are almost same with those of 2015, the difference in its volume when compared to 2015 suggests more success in curbing fraud.

“More attempts in volume can be seen over a period of three years, and the rate is expected to increase significantly if the current recession is to be taken into consideration.

“The current economic recession has and will always drive persons deeper into fraudulent activities.”

In terms of payment channels from which the frauds were perpetrated, the report stated that in 2014, fraudulent transactions conducted through the ATM were 491 cases; Internet banking, 287 cases; and web channels, 218 cases, were the top three.

In 2015, there were 5,133 ATM fraud incidents; PoS, 1,853 cases; and web, 1,463 cases, accounting for the top three most used channels to perpetrate fraudulent transactions.

In 2016, ATM with 9,522 cases; mobile, 3,832; and web channels, 2,677, were the three most used channels.

The report added, “Apparently, ATM and web channels have consistently appeared in the top three channels used to perpetrate fraudulent transactions for three years running.

“This is something we have to look at collectively in the industry as it can be deduced that ATM channel has been the focal point for fraudsters in the last three years.

“The emergence of mobile channel in this category cannot be extraneous to the various financial products and services we have these days, which ride on mobile platforms.”

Speaking on the increasing rate of frauds in the banking system, financial analysts called on the CBN and the Nigerian Deposit Insurance Corporation to step up their regulatory oversights, adding that sensitive positions in banks should not be given to those who were not members of relevant professional bodies.

Those that spoke to our correspondent in separate telephone interviews are the Head, Banking and Finance Department, Nasarawa State University, Keffi, Uche Uwaleke; and a former Managing Director Unity Bank Plc, Mr. Rislanudeen Muhammed.

Uwaleke, an Associate Professor of Finance, said the value system in the country, which celebrates wealth with no questions asked as to the source, needed to be changed.

He said, “There is also a justice system that is very slow and, therefore, fails to act as a deterrent to fraud. Equally are lapses in internal control systems of banks, which are circumvented by fraudulent staff sometimes with the connivance of auditors.

“Furthermore, the flip side of electronic banking is the level of sophistication associated with bank frauds and the specialist skills required in detecting such. So, it is not a surprise that the level of bank frauds is on the rise. Worse still, banking in Nigeria has become an all-comers affair where anybody who can bring deposits is employed.”

As a way forward, he suggested that the control systems in banks should be strengthened.

“Only professionals who belong to bodies that self-regulate their members, such as the Chartered Institute of Bankers of Nigeria, should be assigned to sensitive positions in the banks,” he added.

Muhammed said since bank frauds were a threat to the stability of the financial sector, both the CBN and the NDIC should step up strategies for tackling the menace.

He said, “Recent elevated risk in fraud cases will naturally impact negatively on the individual bank’s loan loss provision, other known losses as well as profitability and capital adequacy ratios.

“The risk of under capitalisation will also impact negatively on solvency ratios. This underscores the imperative for strengthening internal control as well as risk management divisions in banks.

“The Central Bank of Nigeria should ensure compliance by banks of having internal control officers in each branch. This ensures that fraud cases are dealt with timely and proactively rather than reactively or after the fact.”

He stated that in situations where fraud cases were at the corporate level, the chief internal control officers were duty bound to report directly to the regulators as provided by the law.

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Finance

President Tinubu Orders Release of Minors Prosecuted for #BadGovernance Protests

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Following a recent viral video on the X app regarding the prosecution of minors who protested during the #BadGovernance movement, President Bola Ahmed Tinubu has ordered the immediate release of all prosecuted minors.

This was announced by the Minister of Information and National Orientation, Mohammed Idris, in a statement to the State House Correspondents in Abuja.

In a show of concern over the detention of minors, President Tinubu directed the Ministry of Humanitarian Affairs and Poverty Reduction to investigate and ensure that the law is fully applied to law enforcement agents involved in the unlawful act.

It was noted that the arrests violated human rights and the Child Rights Act, as the 32 detainees are under 18 years old.

Activist organizations, including the Arewa Consultative Forum (ACF), National Human Rights Commission (NHRC), Civil Society Legislative Advocacy Centre (CISLAC), Resource Centre for Human Rights and Civic Education (CHRICED), and Concerned Parents and Educators (CPE), condemned the actions and denounced the treason charges filed against the detained minors.

In a call to action, the Socio-Economic Rights and Accountability Project (SERAP) urged the president to instruct the Attorney General of the Federation and Minister of Justice, Lateef Fagbemi, SAN, to immediately and unconditionally release all protesters arrested during the #EndBadGovernance movement.

SERAP stated, “The immediate and unconditional release of all #EndBadGovernance protesters, including 32 hungry and malnourished children, is necessary.”

According to SERAP, for the peaceful exercise of fundamental human rights, including freedom of expression, assembly, and association without fear of persecution or undue restriction, all detained protesters should be released.

In response to the president’s directive, the Attorney General of the Federation (AGF), Lateef Fagbemi, commented that his office “will need to review the matter to enable me to make an informed decision.”

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Banking Sector

FBN Holdings To Invest N103.1bn In Corporate, Retail Businesses

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FBN Holdings

As part of means of actualizing its expectation of raising N150 billion from its existing shareholders by way of rights issue, the management of FBN Holdings said it has budgeted an estimated N103.1 billion for its corporate business and retail business lending segments of the market.

The Holdings recently held the signing ceremony to begin the rights issue offering of 5,982,548,799 ordinary shares of 50 kobo each at N25.00 per share to its existing shareholder on the basis of one new ordinary share for every six ordinary shares held as of October 18, 2024.

Extracts from the offer raising prospectus of the financial institution revealed that lending to the corporate business segment gets N77.34 billion, while lending to the retail business segment gets a budget of N25.78 billion.

This covers 68.95 per cent of the N150 billion proposed rights issue the management seeks to raise from existing shareholders.

Out of the N150 billion, a total of N29.46 billion was budgeted to support international business expansion and N14.73 billion for investment in automation and digital banking.

According to the financial institution, seamless and convenient banking experience for its customers would be guaranteed through its significant investment in automation and digital banking.

Through its mobile banking app, FirstMobile, and its internet banking platform, FirstOnline, the management of FBN Holdings said it has effectively acquired a broad cross-section of the target demography, with a clear proposition of owning bank accounts and utilising various financial services from the comfort of their locations.

It added that the bank plans to upgrade the FirstMobile and FirstOnline apps with additional features while driving customer adoption of the platforms, noting that the development is in line with First Bank’s commitment to providing customers with the best-in-class electronic banking experience.

The offer, however, is part of the company’s plan to recapitalise its commercial banking subsidiary, First Bank of Nigeria Limited,  with a view to increasing the bank’s capacity for business development and growth.

Chairman, FBN Holdings, Olufemi Otedola in a statement from the document urged shareholders to support the Rights issue by accepting their rights, stating that the company will be well positioned to achieve its strategic objectives and to deliver improved returns to all stakeholders.

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Finance

Currency Outside Banks Increases By 66.2% As Nigerians Shun Formal Banking Channels

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New Naira notes

A recent data has revealed that currency outside banks increased by 66.2 percent in September 2024.

To this end, money outside traditional banking channels rose to N4.02 trillion compared to N2.42 trillion reported in September 2023.

This represents an increase of N1.60 trillion in just one year.

This was revealed in the Money and Credit Statistics data of the Central Bank of Nigeria.

According to the data, on a month-on-month basis, currency outside banks grew by 3.8 percent in September 2024 from August’s figure of N3.87 trillion, translating to an increase of N147.9 billion.

The trend suggests a growing inclination among the public to retain cash outside formal banking channels, a shift that could impact banks’ liquidity and shape monetary policy dynamics.

The CBN data further shows that a considerable proportion of Nigeria’s currency is held outside the banking system.

In September 2024, approximately 93.1 percent of currency in circulation was outside banks, a rise from 87.5 percent recorded in September 2023.

This shift may reflect limited trust in banking services, inflationary pressures, or a structural dependence on cash in Nigeria’s largely informal economy.

Such a high percentage of currency outside banks poses potential challenges for channelling funds into productive investments, potentially hindering economic growth.

The CBN report also highlights a parallel rise in overall currency in circulation, which encompasses both bank-held and outside cash.

In September 2024, currency in circulation rose beyond 56.1 percent year-on-year to reach N4.31trn, up from N2.76trn in September 2023, reflecting an increase of N1.55trn.

This indicates that the volume of currency retained outside the banking sector outpaced the total released for circulation within the past year.

Compared to August 2024, currency in circulation rose by 4.0 percent month-on-month, adding N166.2bn from the previous figure of N4.14trn.

Earlier in September, the CBN announced plans to sanction banks that fail to dispense cash through their automated teller machines, as part of efforts to improve cash availability in circulation.

The CBN also revealed plans to release an additional N1.4 trillion into circulation over the next three months to ease cash flow within the banking system.

This strategy aims to ensure that ATMs and bank branches have sufficient cash, addressing ongoing challenges faced by customers over cash shortages.

In related developments, it was observed that Nigeria’s money supply grew significantly by 62.8 percent year-on-year in September 2024, despite the Monetary Policy Committee’s tightening stance intended to manage excess liquidity to control inflation.

According to CBN data, M3 reached N108.95 trillion in September 2024, up from N66.94 trillion in the same period last year.

On a month-on-month basis, money supply rose by 1.6 percent, increasing from N107.19trn in August 2024.

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