Digital Fraud and the Capital Adequacy of Deposit Money Banks in Nigeria

ABSTRACT This study investigates the effect of digital fraud—measured through mobile application fraud, computer/web/online fraud, point-of-sale fraud, and automated teller machine fraud—on the capital adequacy of listed deposit money banks in Nigeria between 2013 and 2023. Drawing on a sample of 12 publicly listed banks and employing panel-corrected standard error (PCSE) regression analysis, the study evaluates how each type of fraud influences the capital adequacy ratio (CAR), a key regulatory and financial soundness indicator. The data, sourced from NDIC, CBN, NEFF, and audited financial statements, were rigorously tested for multicollinearity, heteroscedasticity, serial correlation, and cross-sectional dependence. Results show that computer/web/online fraud has a statistically significant and positive effect on CAR, suggesting that banks with high digital exposure have developed resilience mechanisms or overcapitalization strategies to offset cyber risks. Conversely, mobile application fraud and ATM fraud exhibit negative but statistically insignificant effects on CAR, while POS fraud shows a weak positive, non-significant relationship. These findings imply that while digital fraud remains a pervasive risk, its impact on capital adequacy is neither uniform nor universally adverse; instead, it is moderated by internal controls, technological investments, and strategic loss absorption frameworks. The study recommends that bank directors, regulators, and investors intensify focus on fraud-specific capital planning, incorporating fraud resilience into prudential assessments and risk governance models. A tailored regulatory framework that differentiates capital requirements based on fraud exposure and mitigation capacity is advised. Future research should explore the mediating role of IT governance and fraud response time, as well as comparative studies across African markets with similar digitalization trajectories.