Challenges of accountability in Nigeria: the role of deposit money bank
| Pages | 477-492 |
| DOI | https://doi.org/10.1108/JMLC-10-2019-0082 |
| Date | 07 April 2020 |
| Published date | 07 April 2020 |
| Author | Abiola Ayopo Babajide,Adedoyin Isola Lawal,Lanre Olaolu Amodu,Abiola John Asaleye,Olabanji Olukayode Ewetan,Felicia Omowunmi Olokoyo,Oluwatoyin Augustina Matthew |
| Subject Matter | Financial crime,Financial risk/company failure |
Challenges of accountability
in Nigeria: the role of
deposit money bank
Abiola Ayopo Babajide,Adedoyin Isola Lawal,
Lanre Olaolu Amodu,Abiola John Asaleye,
Olabanji Olukayode Ewetan,Felicia Omowunmi Olokoyo and
Oluwatoyin Augustina Matthew
(Author affiliations can be found at the end of the article)
Abstract
Purpose –The unhealthy drive for deposit in the banking sector has pushed many banksinto unethical
practices, thereby resultingin high-level corruption cases in the banking sector. The purposeof this study is
to investigate the short- and long-run linkages between bank net interest income and deposit liabilities
interacted with corruption, to establish the influence of corruption in depositmobilisation drive of banks in
Nigeria.Also, the study analysed the causal relationship between selectedbank variables and fraud.
Design/methodology/approach –The study used quarterlydata on selected variables from 1Q 1993 to
4Q 2017 sourced from Nigerian Deposit Insurance Corporation (NDIC) annual reports and Central Bank of
Nigeria (CBN) Statistical Bulletin of various issues. Deposit Money Bank various deposit liabilities are
interacted with a corruption indexand used as the independent variables, while bank earnings serve as the
dependent variable. Error CorrectionModel (ECM) and Engel Granger approach to co-integration technique
were used toanalyse the data.
Findings –The findings reveal thatvarious bank deposit liabilities interacted with corruptionindex has a
negative effect on bank profitability in the long run, though only corrupt fixed deposit is statistically
significant at the 5 per cent significance level. Bank total asset,total loan and advances and fraud have a
significant effect on bank profitability at 1 and 10 per cent significancelevel. The findings also reveal that
banks profitfrom corrupt fixed deposit and demand deposit in the short run.
Social implications –Text
Originality/value –The literatureis awash with bank lending corruption and variousinstitutional factors
such as competitionamong banks, credit bureau and information sharingabout borrowers, bank supervisory
policies, loan loss provisioning, bank ownership structure and regulatory environment and anti-corruption
measures. The aspect of deposit mobilisationand corruption has not been well researched in literature; this
study, therefore, fills the gap in the literature by examining the extent deposit money banks contributed to
corruptionin Nigeria through their cutthroat deposit mobilisationdrive.
Keywords Bank fraud, Challenges of accountability, Demand deposit corruption,
Deposit money bank, Savings deposit corruption, Term deposit corruption
Paper type Research paper
© Abiola Ayopo Babajide, Adedoyin Isola Lawal, Lanre Olaolu Amodum, Abiola John Asaleye,
Olabanji Olukayode Ewetan, Felicia Omowunmi Olokoyo and Oluwatoyin Augustina Matthew.
Published by Emerald Publishing Limited. This article is published under the Creative Commons
Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative
works of this article (for both commercial and non-commercial purposes), subject to full attribution to
the original publication and authors. The full terms of this licence may be seen at http://
creativecommons.org/licences/by/4.0/legalcode
Role of deposit
money bank
477
Journalof Money Laundering
Control
Vol.23 No. 2, 2020
pp. 477-492
EmeraldPublishing Limited
1368-5201
DOI 10.1108/JMLC-10-2019-0082
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm
1. Introduction
Transparency international in 2018 reportedthat the global average score for corruption is
barely 43 per cent, indicating endemiccorruption in most countries in the world resulting in
a vicious circle of poverty, unequal distribution of wealth and power and denial of
fundamental human right. People living in highly corrupt countries are faced continuously
with extortion and bribery, dilapidated public infrastructure, injustice with attendant
inability to seek redress in the law court to mention a few. World Bank, in 2017, reported
that businesses and individuals pay a significant amount as bribe each year estimated to
about 2 per cent of total world gross domestic product (GDP) and ten times the value of
Oversea Development Assistance (ODA). The negative impact of corruption on the global
economy far outweighs the estimated cash volume with an attendant consequence on
economic growth and development (Jiang et al., 2018). Issues of corruption are not only
prevalent in low-income countries; they cut across all the regions of the world, but their
severity is felt most in low-income developing nation where corrupt government official
trample on people fundamentalright with impunity.
Okereke and Kurotamunobaraomi(2016) opine that corruption in the public sector of the
economy has a direct reflection on the private sector as a result of the policies, actions,
activities and corruption tolerance level in public office. There are several corporate fraud
cases in Nigeria. The bankingsector is not insulated against it, as it often serves as a conduit
pipe for a public officerto perpetuate corruption in Nigeria.
Banking institution exists to carry out financial intermediation in the society, among
other functions (Amodu et al., 2018). As a vital component of the financial system, banks
play an essential role in the economy of a nation by allocating fundsmost efficiently from a
surplus unit to the deficit unit of the economy. They provide specialised financial services
that help in reducing thecost of information for both savers and borrowers, which resultsin
inefficiency in the economy. Banksoperate and remain in business by giving out a loan and
earning interest on the investment. They accept deposits from individual, institutions
and government and also give credit to individuals, businesses, financial institutions and
governments with surplus funds (savings). Deposits and borrowed funds (liabilities of the
bank) are also used to purchase securities (assets of the bank), while interest rates adopted
by the monetary committeesignal the price for borrowers, lenders and banks.
Financial intermediation implies the ability of the bank to mobilise funds from the
surplus unit and channel it to the deficit unit forinvestment and development of the society.
Savings mobilisation is one of the core functions of the bank; in fact, it is where the bank–
customer relationship starts. Bank evolves the different financial product to mobilise fund
from members of the society. In a typical commercial banking system, banks develop
financial products suchas demand deposit, time deposit and savings deposit product.Funds
mobilise are channelled through the lending process to other bank customers who need
capital to run their businesses. Thesecategories of customers pay back the funds borrowed
with interest, whichconstitute the main business of the bank in the society.
The need to mobilise funds for banking operations and maximising profit has pushed
many banks into several unethical practices,thereby resulting in corruption in the banking
sector. Corruption in Nigeria Deposit MoneyBanks is perceptible in three facades. First, by
the employees of the bank who circumvent the rules and regulation of the bank to enjoy
private gain at the expense of the stakeholders (Azelewa, 2002). Then, at the institutional
level where corruption is instigated and condoned by management to achieve a pre-
established objective, mostly associated with fraudulent accounting reporting (Section 40,
EFCC, 2004). Finally, systemic corruption, where inter-bank collusion and acts contravene
relevant guidelines to weaken the entire bankingsystem. For instance, in 2009, the Nigerian
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