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Fraud is an epidemic dimension that has eaten deep into the banking sector as well as the entire economy. Its devastating effect manifests itself in the deteriorating balance sheet of banks as well as in economic backwardness. As a result, measures to eradicate fraud in banking sector become a central focus of the government and the monetary authorities. It was against this backdrop that this study was aimed at providing empirical evidence on the effect of fraud on the performance of banks. Data for the analyses were obtained from primary data through questionnaires and secondary data from Nigeria Deposit Insurance Corporation (NDIC) Annual Report. Four hypotheses were formulated to access the impact of looting of the fund, social and environmental factors, motivation and government effort on the effect of fraud on banks performance in Nigeria. These were tested with simple percentages and chi-square (x2) statistical technique at a 5% significance level. Results showed that lack of adequate motivation is not a major cause of fraud in banks, looting of funds by bank managers and directors constitutes the major form of fraud in Nigeria, government effort and its agencies have negatively impacted on combating fraud in Nigeria and environmental or social factors have a negative impact on bank fraud. On the basis of findings, it is recommended that government should make their impact to be felt in combating fraud by establishing more agencies for combating frauds.
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The impact of bank fraud and distress on banking performance in Nigeria