CEM REPORT, FINANCE | Nigeria’s banking sector and payment systems have lost ₦9.5 billion so far in 2023 to Electronic Fraud (E-Fraud).
Fraud losses have increased dramatically over the last five years with about ₦3 billion recorded in 2019 and about ₦9.5 billion in 2023.
Premier Oiwoh, Managing Director of the Nigeria Inter-Bank Settlement System (NIBSS), observed that the industry in 2023 had its highest actual loss value of ₦2.7 billion in January and its lowest value of ₦800 million in June while speaking during the Q3 2023 general meeting of NeFF in Lagos.
He noted that the highest fraud count in the last six months was recorded in May 2023 with 11,716 cases while the lowest count was in June 2023 with 6,240 cases.
He added that for the first quarter of 2023, the total fraud reported through the industry forum portal was at ₦5.1 billion.
“Recently, we had the cashless policies from CBN, which was incurring a dramatic increase in the volume of transactions in the industry which variably has the impact of the volume of fraud in the industry itself. Now, the increase and efficiency has also meant that fraud has dramatically increased across the industry. For Q1 2023, the total fraud reported through the industry forum portal was at ₦5.1 billion.
“For fraud trends over the last five years, in 2019, we’re looking at about ₦3 billion and currently 2023, we are looking at about N9.5 billion to date. Fraud losses have increased dramatically over the last five years.”
Represented by the Chief Risk Officer, NIBBS, Temidayo Adekanye, he continued that scammers recently discovered a way to divert money through wallet accounts and betting platforms, which has resulted in low success rates for recovering that money through such channels due to poor identifications.
“What we see most is the fact that the primary channels are the betting platforms. So once the money hits the betting platform or a wallet account or in some cases, POS agents, once it is cashed out, it is a black hole. There is no way you can recover that money. We’re talking about potentially 5 per cent recovery rates across the industry. So, we all have to identify those betting and wallets accounts, POS agents, cryptocurrency accounts, and in some cases purchases.”
Managing Director of Fidelity Bank, Nneka Onyeali-Ikpe, commented that the gradual escalation of E-Fraud is eroding customers’ trust in the financial system. She stressed the need for a swift and decisive approach to address E-fraud within the financial sector.
“However, with the rise of these digital interactions, the threat of E-fraud has become a significant challenge affecting individuals, businesses, and the industry. The data we have from the NiBBS is that the volume of electronic payment transactions in Nigeria increased by 298 per cent year-on-year.
“The banking industry lost a total of ₦14.3 billion to electronic fraud in 2022 up from N12.7 billion in 2021. As Q1 2023 is about today it’s ₦5 billion and then the problem here is that the trend so far shows that if this continues unchecked, it would rise to ₦20 billion for the full year.
“E-fraud has permeated multiple industries, spanning from banking and finance to e-commerce and beyond. These cybercriminals leverage advanced methods to exploit vulnerabilities, gaining unauthorised access to crucial data and funds. The repercussions of e-fraud are not limited to financial losses; they also extend to eroding trust and eroding brand reputation.”
Director of Payment Systems Management of the Central Bank of Nigeria (CBN), Musa Jimoh, on his part, noted that the banking sector and payment system players need to look at new ways, new techniques, and more efficient manners to improve and guard against the banking and payment infrastructure on safeguarding bank credentials or tokens and all the information.
Jimoh, who doubles as the Chairman of Nigeria Electronic Fraud Forum (NeFF), whilst stating that the goal is to achieve zero fraud, harped on the need for public enlightenment as electronic transactions increase.
“We are gathered to see how we can secure our environment, how we can secure our digital environment, and how we can secure cyberspace. We all keep our money in electronic form.
“Today, we are here to continue that conversation to look at new strategies by which we can combat E-fraud. If we don’t combat the cyber criminals, they will take us down and disrupt the entire system. So, we all need to work together to see how we can make life extremely difficult for cybercriminals.
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“We need to look at new ways, new techniques, and more efficient manners by which we can improve and guard against the banking and payment infrastructure and educate ourselves on how we can safeguard our bank credentials or tokens and all the information that the banks have provided to us to safeguard. The more information we have about what they’re doing, the more we are protected.
“The objective is to have zero fraud, but you know, this is a gradual process because as you’re building techniques, they’re also exploiting other areas. As more people come into the financial sector, as more transactions happen, people are vulnerable and so we need enlightenment, and education. We will continue to push it, which is why it’s going to be a very long journey.
“But I know that with the kind of enlightenment and the push by the bankers’ committee, and other stakeholders, a lot of Nigerians will be well educated to know that they have to keep all the accounting details very secret and therefore we anticipate that the incidence of fraud we taper down almost to zero.”
NeFF officially unveiled a website to aid collaboration and information sharing to curtail E-fraud.
