Nigerian Banks in Crisis: Fraud Cases Soar, Totaling N12.33 Billion

A recent report by the Financial Institutions Training Center (FITC) has exposed a staggering surge in fraud cases.

These nefarious activities have collectively drained an alarming N12.33 billion from the nation’s financial institutions in the first half of 2023.

The FITC report, titled “Reports of Fraud and Forgeries in Nigerian Banks (Quarter 2, 2023),” paints a bleak picture of the challenges faced by the banking industry in Nigeria. Mobile fraud, computer/web fraud, and Point of Sale (POS) fraud have emerged as the principal culprits behind this alarming trend.

During the second quarter of 2023, FITC received a total of 71 reports of fraud and forgery from 24 deposit money institutions. These figures reveal an escalation in fraudulent activities, with 24 reports coming in April, 23 in May, and 24 in June, indicating a relentless assault on the financial sector.

Perhaps even more disconcerting is the comparison to the preceding quarter. While the first quarter of 2023 reported 12,553 cases of fraud, there was a slight reduction to 11,679 cases in the second quarter.

This decline, however, offers no respite as mobile fraud, computer/web fraud, and POS-related fraud continue to grip the industry.

The financial implications are equally alarming. FITC’s report highlights an astounding 276.98 percent increase in the total amount involved in fraud cases during Q2 2023 when compared to the previous quarter.

The figures surged from N2.58 billion to a daunting N9.75 billion. Equally distressing is the escalation in losses, which skyrocketed by 1125.03 percent, climbing from N472 million in Q1 2023 to a staggering N5.79 billion in Q2 2023.

An analysis of the data reveals a shift in the dynamics of these fraudulent activities. While outsider involvement in fraud cases dropped by 6.40 percent in Q2 2023, with the number falling from 12,351 cases in the previous quarter to 11,561 cases, there was an alarming 22.22 percent increase in staff involvement, rising from 72 cases in Q1 to 88 cases in Q2 2023.

The consequences of this surge in fraudulent activities have been dire. A total of 26 individuals have faced termination of employment due to their involvement in fraudulent activities in the first half of this year. Also, the second quarter of 2023 witnessed a substantial increase in fraudulent loans, accounting for N6.03 billion.

Breaking down the fraudulent activities by category, fraudulent loans topped the list at N6.03 billion (61.86 percent), followed by computer/web fraud at N1.47 billion (15.10 percent), mobile fraud at N751 million (7.7 percent), and fraudulent withdrawals at N663 million (6.79 percent).

FITC’s report also highlights the channels through which these fraudulent activities occurred, including ATMs, online platforms such as web and mobile banking, bank branches, and point-of-sale terminals.

Moreover, the report underscores the financial burden placed on the banks themselves, stating, “The increase might be attributed to the fact that banks were liable for the losses incurred and had to make refunds to customers.”

In response to these alarming statistics, FITC has urgently called upon Nigerian banks to bolster their security protocols and systems to prevent unauthorized access to customer accounts and safeguard sensitive information.