Effect of Financial Crimes on the Performance of the Nigerian Economy
CHAPTER ONE
Objective of the Study
The main objective of the study is to determine the effect of financial crimes on the Nigerian Economy. The specific objectives are;
- To determine the extent to which fraud affects the Gross Domestic Product (GDP) of the Nigerian
- To ascertain the extent to which fraud affects the Federal Government revenue of the Nigerian
- To determine the extent to which fraud affects the Gross Fixed Capital Formation (GFCF) on the Nigerian
CHAPTER TWO
LITERATURE REVIEW
Conceptual Review
Financial crimes
Financial crimes according to Kumar 2012, is the process by which large amount of illegally obtained money (from drug trafficking, terrorist activity or other serious crimes) is giving the appearance of having originated from the legitimate source. But in a simple term, it is the conversion of black money into white money. This takes one to cleaning the huge piles of cash, if done successfully, it allows the criminals to maintain control over their proceeds and ultimately to provide illegitimate cover for their source of income. Financial crimes plays a fundamental role in facilitating the drug traffickers, the terrorist, the organized criminals, the inside dealers, the tax evaders as well as the many others who need to avoid the kind of attention from the authorities that sudden wealth brings from illegal activities. These criminal enterprise seek to obtain money and power through criminal conduct and then attempt to infiltrate the legitimate society, thereby distorting the terms of the compact. The generate millions upon millions of dollars for the members of the enterprise and allow their associates to live lavish lifestyles that have been forged from the misery and despair that their criminal activity proceeds.
Financial crimes as an expression is one of the fairly recent origin. Financial crimes is a sophisticated crime not to be taken very seriously at the first glance by anyone in the society. As compared to street crimes, it is a modern crime. At times, people often refer to it as a victimless crime but the reality is that it is not a crime against a particular individual, but it is a crime against nations, economic government, rule of law and the world at large. Financial crimes has become a worldwide menace.
Fraud
Fraud according to Wein (1995) sited in Ani Comfort 2015, is an act or course of deception directed to the detriment of another. In legal terms, fraud has been defined as an act of deriving dishonestly of something which is or entitled to but for the perpetuation of fraud. While in the words of Orji (1996) cited in Ani (2015), is defined as the conscious deliberate effort aimed at obtaining unlawful financial advantage at the detriment of another person who is the rightful owner of the fraud. In a literal sense, fraud may be used as an umbrella term of cover almost all classes of white colleen crimes known to law and business. There is a general consensus among criminology that fraud is caused by three elements namely: will, opportunity and exit, that is, the will to commit fraud by the individual, the opportunity to execute the fraud and the exit which is the escape fraud sanctions against successful or attempted fraud or deviate behaviour.
The Nigerian Economy
According to Uyoyou & Ebipanipre (2013), the Nigerian Economy being a developing country is characterized mainly with the term ―informal economic activities‖. ―An informal economy is the unregulated, non-formal component of the market economy that produces for sale or for other forms of remuneration‖ (GIABA Report, 2001). An informal economy relates to economic activities which are not covered or governed by a formal arrangement. It has been observed that informal economy in most countries in the West African region is cash and commodity oriented. Thus, payment for most product purchasing and services are basically done through direct cash payment. The 2009 World Bank report reveals that ―across Africa, more than 80% of households do not use formal banking.
CHAPTER THREE
RESEARCH METHODOLOGY
Research Design
In consonance with Osuala (2000), research design is the program that guides the researcher in the process of collecting, analyzing and interpreting data and information. The research design adopted for this study therefore is ex-post facto research design. This research design is appropriate for this study since the study is conducted over a period 6 years (2010-2015) using past data, that is, using existing data.
Population of the Study
The population of the study consists of all territorial and sovereignty of the entity called Nigeria. This is without an exception of any state and geo-political zone in Nigeria including the Federal Capital Territory (FCT).
Sample Size and Sampling Technique
Based on the large population, the researcher adopted convenience sampling technique to choose data from Federal Ministry of Finance, Budget Office of the Federation, Abuja and Central Bank of Nigeria‘s statistical bulletin in order to obtain data for the study through a centralized location instead of making visits to different geo-political zones in Nigeria.
CHAPTER FOUR
PRESENTATION AND ANALYSIS OF DATA
Test of Reliability
This study tested for stationarity unit root test in order to fulfil the economic theory which states that variables that must enter a regression model must undergo a stationarity test in order to achieve a realistic (non spurious) result at 1%, 5% or 10% level of significance. F, GDP, FGR and GFCR did not pass through the zero point several times, therefore, have unit root problem; consequently, the data were detrended using the Augmented Dickey-Fuller (ADF) test. The result of the differenced data in order to solve the unit root problem.
Interpretation of Regressed Result
The regressed coefficient result from table 4.3 reveals that there exists negative association between fraud and GDP and statistically significant at 1%. The adjusted R-squared value shows that 82% of the systematic variations in the dependent variable can be predicted by the independent variable. And 18% was explained by unknown variables that were not included in the model. The Prob (F-statistic) is statistically significant at 5% level of significance.
CHAPTER FIVE
CONCLUSION AND RECOMMENDATION
Summary of Findings
The findings of the study are as follows:
- Table 4.3 shows that F-statistic = 0.000000<0.05. This value is lower when compared with A priori alpha level (level of significance for the statistic) 0.05. Hence, Ho is rejected. It is therefore found that financial crimes (proxy by Fraud) has a negative and statistically significant effect on GDP of Nigeria Economy at 5% level of
- Table 4.5 shows that F-statistic = 0.000007<0.05. This value is lower when compared with A priori alpha level (level of significance for the statistic) 0.05. Hence, Ho is rejected. It is therefore found that financial crimes (proxy by Fraud) has a negative and statistically significant effect on FGR of Nigeria Economy at 5% level of
- Table 4.6 shows that F-statistic = 0.000005<0.05. This value is lower when compared with A priori alpha level (level of significance for the statistic) 0.05. Hence, Ho is rejected. It is therefore found that financial crimes (proxy by Fraud) has a negative and statistically significant effect on GFCF of Nigeria Economy at 5% level of
Recommendations
- The study therefore recommends that possible review of the laws on corruption and financial crimes be carried out with a view to harmonize the laws and increase the punishment for economic crimes to deter future
- There is need to reappraise the established institutions fighting economic crimes particularly their statutory functions, roles and relationships such as the Economic and Financial Crime Commission (EFCC) and the Independent Corrupt Practices and other related offences Commission (ICPC).
- Government should collaborate with foreign countries hosting looted funds such as United Kingdom, United States of America and Switzerland to repatriate the funds back to Nigeria or rather use the funds to shore up its foreign reserve.
Conclusion
The study sought to investigate the impact of economic crimes on the Nigerian economy. In doing this, the nature of the relationship between economic crimes and economic growth was found to be non-linear with significant long-run relationship. Economic crime variable was found to be the most significant of all the variables of the model for economic growth and so deserves serious attention more than it has received in the recent past. Therefore, any nation that allows economic crimes to thrive will pay dearly for it through an economy of highly impoverished citizens which in turn diminishes the ability of future generations to sustain themselves. Government is advised to pursue vigorously industrial growth as a policy to addressing youth unemployment, reduce poverty and income inequality. However, to achieve this, government must deliver critical infrastructure (power, road etc) that creates the enabling environment for industrial growth. Government should make this objective one of its top priorities so that economic offenders could be positively engaged and turn their minds away from economic crimes. This will ensure effective reduction of economic crimes in Nigeria.
In the same vein, since economic crimes and economic growth have non-linear relationship and also share a bi-directional causal relationship, it is recommended that a matrix of policies and programmes that increase effective aggregate demand and at the same time reduce opportunities to commit economic crimes should be pursued. Engaging the youths in skill acquisition and empowerment programmes is, therefore, highly recommended. This is in addition to creating an enabling environment for small and medium scale enterprises to thrive. Finally, the education system in Nigeria must be re-organized and re-strategized in such a manner that it delivers critical knowledge and skills that will contribute in the growth of the economy by providing graduates from tertiary institutions with required skills to make them self-reliant at the end of their studies. Youths constitute the Adam Smith’s large army of unemployed and are easy conduits for commission of economic crimes.
On the whole, a call for value re-orientation is advocated as all hands must be on deck to rout this deadly cancer-worm that has prevented Nigeria from taking its pride of place in the comity of nations. It is then that the national opulence will increase, which is capable of trickling down to the lowest ranks of the people.
References
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