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Financial fraud and the effect of insider abuse in Nigerian banking sector

Udo E Samuel, Ben E Udoh, Abner I Prince*, Ike R Nneka, Ibekwe U John

The fundamental objective of this study is to scrutinize the effect of insider abuse in the Nigerian banking sector along with its rudimental causes. The Classical Linear Regression Model (CLRM) was adopted along with secondary data extracted from the Nigeria deposit insurance corporations (NDIC) annual account report 2000-2016. The Ordinary Least Square technique signifies the prime technique of analysis as recommended by the ADF unit root test result. The ADF unit test revealed dataset stationarity at first order difference I(1). The R2 explains that 76.32% of the variation in the dependent variable is explained by the principal regressors. Total cases of fraud and amount involved were established to have a positive link with the total expected loss while, staff involvement, and total expected loss established negative and non-significant link. The study established that fraud in relation to insider abuse is not peculiarly Nigerian. The results bare that insider abuse are breed where there is weak and faulty internal control, lack of job security and reward for excellence. Recommendations are that financial institutions must review their internal control system, along with staff salary, the quality of staffs recruited and the audit system of the bank