A new report from the Financial Institution Training Centre (FITC) highlights that fraudulent loans totaling N5.46 billion made up 94.35% of the overall losses due to fraud recorded by Nigerian commercial banks during the second quarter of 2023.
The FITC Fraud and Forgeries report reveals that 24 commercial banks in Nigeria suffered a total loss of N5.79 billion due to fraud, showing a significant increase of 1,125.03% from the N472 million lost in Q1 2023.
The data indicates a substantial surge in the total amount involved in fraud cases during Q2 2023 compared to Q1, with the sum escalating from N2.58 billion to N9.75 billion, marking a 276.98% increase.
After fraudulent loans, mobile fraud accounted for 3.39% of the total loss, equivalent to N196 million. On the other hand, computer/web fraud contributed only 1% of the total losses in Q2, amounting to N59.5 million over the three months.
The report by FITC states that the most prevalent types of fraud in the first quarter of 2023 were mobile fraud, computer/web fraud, and POS-related fraud, which continued the trend observed in the first quarter of the year.
Although there was a rise in the value of fraud cases in Q2, the number of reported cases decreased compared to Q1. In Q2 2023, a total of 11,679 cases were reported, reflecting a 6.96% decrease from the 12,553 cases recorded in Q1.
The growing prevalence of fraud is posing challenges for commercial banks. The rapid adoption of digital banking technology, coupled with a youthful population and increased smartphone usage, has created more opportunities for fraud.
The Nigeria Inter-Bank Settlement System (NIBSS) warned that while technology advancements enhance banking services, they also introduce more vectors for fraudulent activities. NIBSS disclosed that Nigerian banks lost N9.5 billion to e-frauds by August 2023, and when combined with non-electronic fraud, the total loss for the year exceeds N10 billion.
Required Actions for Commercial Banks
In response, FITC recommends that Nigerian banks enhance their security measures by implementing multi-factor authentication, strong encryption, and regular security updates.
It also suggests using advanced fraud detection systems based on artificial intelligence (AI) and machine learning (ML) to identify anomalies and suspicious activities in real time. Regular internal audits are also advised to uncover vulnerabilities that fraudsters could exploit.