Mismanagement In Financail Institution (Bank) Effect And Solution

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Mismanagement in Financial Institutions – Causes, Effect



A financial institution is an organized body, concerned with the management of money. This is to say that the institution is responsible for the lending and borrowing of money. In other works, it is an institution involved in financial intermediation where money is mobilized and channeled from the public dialing (those who have surplus fund and want to some to those who want to invest in productive activities) some of the institution in Nigeria are “CBN, merchant bank, commercial bank, insurance company, Development banks, stock exchange market etc.

Mismanagement is defined by “Land-man English dictionary” as control or deals with private, public or business affairs badly or unskillfully etc.

The mismanagement is also defined by “oxford English dictionary version” as mismanage, bad improper administration to manary badly or wrongly. Then financial mismanagement according to the above definitions may be improper administration bad or wrong use of money inadequate collateral security of granting loan mis appropriation collateral of money or management of finance unskillfully.

The central bank of Nigeria (CBN) is the open bank of a national that serves as the main source of revenue to the government, it equality gives advisory measures to the government. And also help the government extremely in international trade etc.

To the public and private individual bank especially the commercial banks provides draftier support to the public and individual affairs. The bank grant loans advances, make payment locally or outside Nigeria. In fact they perform varieties of functions to satisfy the financial needs of all types of customers from small personal account holder to big incorporations and public organization. That is by accepting deposits, safe custody agency services e.t.c.

This industries have grown beyond optimistic expectoration over the year or period in the number of bank that expanded in five years. The variety of bank increased and the growth of the industries resulted to loss of professionalism in services, increasing fraud owing to the craze for material wealth, inflating of contract, God fatherism poor portfolio and other back malsfeasence which has contributed extremely to the constant report of financial mismanagement in a financial institution. The causes of financial mismanagement and misappropriation of public funds are now rampant in these financial institutions.

Eve the workers in these institutes had complained bitterly about hanger and starvation. Due to mobility of the manger to pay of their salaries. This has almost the time happened due to misappropriation and improper control and utilization of funds ment for salaries.

Reports of riots, unrest or strike of workers which bring a lot on the economy not to function effectively due mismanagement by manager of this financial institution.

In this case, mismanagement has resulted to a great effect over many sections of life of the above mentioned. Such as company, individuals, worker and the economy as a whole. The tendency to embezzle and get rich quick mentality his continued down the line. The serious act of financial institution in Nigeria.

Furthmore, mismanagement in financial institutions has make them unable to tackle their problem and obligation like paying of takes to the government, cash reserved ratio workers salaries, giving our loan e.t.c

After the last over throvobment of the civilian administration in the country many financial institutions made a lot of staggering discovered to fund misappropriation through inflated contract, bribery and kick backs etc. Since then Nigeria economy has become a sick body up till today.

Mismanagement in these financial institution had contributed to a large extent to the various drown-back, which inhabit infrastructure workers salaries. This has also created a lot of imbalance to the government in their revenues generation, Necessary that a research of this kind is carried out for possible solution to the problem of fraud mismanagement in banks.

In Nigeria today, financial institutions are among the important institutions which are responsible for the countries economic growth without financial institutions like companies, capital market etc. Nigeria and other countries will find it difficult to framsalt business together financial institution like banks perform some duties to the country, state public and individuals.

Some financial institution closed up due to the fact that mismanagement closed up too and companies and individual who have account in this bank lost.

During the period of the civilian administration over thrownment many financial manage to survive through inflated contract, briddery and kick back etc, which lead the economy of Nigeria back ward, in fact financial analysts put public fund to as been misused and equaling smuggled out of the country a several billion of anria.

Finally, various officers mostly the managers and cashiers of those institutions are accused of the abnormal. The researchers went in deep to finding out the true situation. Manager contributes a majority of the respondent use.



In this aspect it is well known fact that adequate management in the financial institutions will enable them play their roles as supposed. And achieve their basic aims and objectives as well as they planned it earlier. But they have been unable to perform their rules ie, selling of securities, paying of tax which is a source of revenues to the government.

Thereby encountering some problems which may be started as following:

i. They are finding themselves to meet customers with dreads.

ii. They is persistent loss

iii. That, they are having poor turn-over

iv. That they are having loss of trust by their customers, in as much as not investing on them anymore.

v. Unable to abide by relevant laws especially before the financial ordinance.

vi. Customer withdraw much from them thereby reducing deposit abilities which constitute the main source of banks, loan ably funds.

vii. That the issue has accommodated distress in the banking system which has encouraged deterioration and failure in banking or financial activities thereby reversing of the gains or profit made in the past.


Financial institution have been identified as the catalyst for a meaningful economic transformation of the country. This is no doubt that financial institutions are an important sector in the economy of Nigeria.

Financial institution encountered a lot of financial mismanagement lending to incapacitate. These are problems associated with the interior operator ie, the managers, accountants, cashiers etc.

I strongly believe that, if the cause of the financial mismanagement in financial institution and its effects and set of people it affect in identified, it will give way for easy and smooth eradication or control in these institutions it affects such as banks, stock exchange market, capital market etc. So as to achieve its objectives and aims in life. It provides machinery for which medium and long term funds or loans are mobilized and made viable to business government and individuals.

It provides a base for capital formation and industrialization. It is in view of this that I have taken up this course of study to examine thoroughly the cause of the financial mismanagement as well as its effect and the people it affected and how it affects them. In effect of this purpose. I want to find out the objective of the study in this research work done.

i. Employment of qualified staffs to fits in those position

ii. The roles of accountant to the public

iii. Eradication of and fatherism in financial institution.

iv. The way banks can built there internal and external security to avoid fraud.



The research work on the relationship on the cause and effect of mismanagement in a financial institution can be of immense value to the banks and all other financial institution. The result of this research work will enable the financial institution to up-grade its financial security effectively especially in eradicating fraud in a financial house.

This research work will enable the financial institution to successfully and most efficiently carry on the function in accordance with the set goals and objectives of the financial institution.

Moreover, this work will help to frighten the God fatherism syndrome and to pave way for qualified graduates or experience workers to carry on this jobs effectively.



In the course of this research work a lot of difficulties were encountered.

i. Since it is limited to secondary datas, insufficient book, journals, magazines hampered the smooth success of the research work..

ii. The limitation of the research inquire as related to time, distance and financial commitment in transportation to libraries.

iii. The banks course so many problem in providing the research work with viable materials like statement, roll call of staff who are qualified.





In Nigeria today, it is true that Engineers who did not know about finance and its technique is working in the bank as Chief accountant. To that further problems do arise in financial institutions. Problems like misdirection, fraud and reflect of banking law. Many who achieve this position without meriting gets it through the act of jealousy, impeachment and death what to expect an unqualified manger to do, The principle guiding accounting and book keeping is not of relevant to him, misleading the affair of the financial institution and also loss in liquidation.



Financial institution has started experiencing mismanagement in their organization over past ten year according to surgery and statistical (secondary) experience explained. When these is inflation in the country, which made the value of money to reduce to grass level then potential investors will be unable to cover the loans granted to them by the financial institution.

In a situation where by the lender is at gain and the borrowers will find it difficult to cover the money he has invested on the business and to pay it back. In this case most financial institutions will be unable to recover their loans and its interest from their customers which opens a ways to capital reduction that comfiture mismanagement.



Those manager in financial institution inflate contracts. If there is any contract to be done, it may be within the country/outside the country. Thus managers opens branches on different area according to the contract awards all to have contract to them self by doing the followings.

i. Those managers will forge receipts and buy unnecessary and irrelevant things for the project in order to smuggle outside the country several millions of naira from the institutions.

ii. By having compromise or colliding with the contract or to over charge and estimate for the building of the new firm, so that later they might share the excess profit gained from it.

The tendency to embezzle and get rich very quick mentality has continued to bring uncontrollable financial mismanagement in the financial institution in our society.



In this case, unqualified officer but with some attribute goes to those who have knowledge but unable. In perform in their offices to seak for knowledge.

Without being told you are suppose to know that mobility to perform well in the office will also bring about mismanagement in the financial institution, most managers and workers in these institution are not competent, you can see where a person name cashier will not be able to count money accurately and sometime they pollute the books of account to wrong posting and balancing. When such happenings occur, some chief accountants and managers will never cross check these entries and won’t take a look at their young or junior officers activities.

In most case the officers who prepares the account due to incompatentness can identify when managers influence4 the books of account there by putting them in to big trouble and making them defenseless to prove if it is an artificial act.

Clerical errors by the incompetent officers, or clerks contributes a lot to the management. Here banks, cashiers are making posting of items to a wrong account, but one of the same class to which it should have been posted. Unable to record, they are unable to record cash or cheques received as soon as possible. If proper systems are not enforced, it might result to mismanagement.



This attributes financial mismanagement in our financial institutions mostly in some banks today.

So-called mangers and top officials can never stay without having big manism syndrome in their mid. The issue of bigmanism has made almost all the managers and officers of financial institutions to act fraudulently in whatever they are doing in the office. The word “fraud’ in the side of manner refers to irregularities involving the use of crime deception/to obtain an unjust or illegal benefit. (I,e obtaining finance under fulse pretence of company true).

There is also fraud of employees or junior officers, which involve theft, misappropriation embezzlement of the company’s fraud usually in form of cash or of its other assets. Cash being the most readily susceptible target fraud, there is other areas of fraud by the top officers or managers.

Inflating of payment vouchers: The managers or accountants up lift or overstates the payment vouchers so as to gain from it. Incision of non-existing workers(ghost.workers) in the wage sheet, pilferage stock whapping of superior asset with interior types distraction of accounting document with a view to obtain the benefit attached thereto.

For instance, debtors accounts or 10u’s printing of illegal recants or invoice and local purchase orders and suing such to convert the company’s.


In this case financial institution, bribery and corruption has been the order of the day some of the financial institution, certificate or qualification but they prefer to employ because they have God fathers. In this case some people are employed through IM (Ima nmadu) according to vernacular. This wrong system of employment has caused a very big fraud or mismanagement in our financial institution and the society at large.

Even when the unqualified workers like sculprous cashiers, clerks are employed may be through family relationship with the managers and any top official. They still go length in polluting the whole books of account.



In this case mismanagement has created lost of problems to all sector of the financial institution. When some or a financial institution are unable to pay its workers salaries and other allowances, and some grace is given to pay them and if this payments are not made they react either through strike, civil unrest or even riot and well. If the above problem should continue the central bank or the government interferes, looking into the issue may decide to close the institution due to inability to pay tax or meet up with their responsibility.



Mismanagement as we all know does not affect the financial institution only but also affects the economic nature of the country in particular. This expresses the way it affects the economy through the management or government. It equally affect the economy through the individuals. That is to say that mismanagement also affect the economy through individual when many financial institution are in distress, caused by lack of management of their by retrenching their works when it gets too much for them to cope with.

This act has attributed a lot to mass unemployment in our society today, which affects the entire nation’s economy . If unemployment is much in the society like wise in a country, the standard of living will reduce and the les privilege ones will suffer more than expected.

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