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Mafia Leadership and Its Implications on Bank Distress in Nigeria – 1930-2020

Leadership is primarily concerned with influence and to get people carry out certain functions to achieve institutional goals. But desired institutional goals may not be achieved within the context of bad leadership which is often characterized by selfish interest. For many years the banking industry in Nigeria witnessed deteriorating performance as the result of micro leadership, bad management, and manipulation in the form and character of the corporate Machiavelli, and creating room for insider-trading, resulting to huge unsecured and NPLs. For example, in 1996 alone, 178 directors of distressed banks were sacked, while 75 shareholders and ex-employees of distressed banks were successfully prosecuted for fraud and unethical practices and barred from holding any responsibility in financial institutions. Some commercial banks were suspended from the interbank clearing house, while some merchant banks were placed on holding action, and barred from taking deposits. The distressed banks and their directors were found guilty of monumental malpractices with the active connivance of auditors in fraud-sheltering. In professional conduct, the allegiance of the external auditors’ should not go to the directors’ but to the shareholders who appointed them to protect their interests. The fundamental role of the external auditors is to act as a counter- balancing force to those directors’ or majority shareholders who often have enormous sweeping powers in their organizations to the detriment of the minority and the enterprise as a whole. Mafia leadership connotes a bad situation whereby organizational structures often with a federal arrangement of interconnected groups sharing common goals for a range of products and services become under the control of an individual in the sense of ownership, creativity, and for personal interest which such manipulations engender. The exploratory research design was adopted for this study and the result showed positive relationship between mafia leadership and bank distress. The study was not exhaustive, and further research is required to examine the relationship between auditors’ role and huge insider NPLs in Nigerian banks. To minimize the incidence of distress in the Nigerian banking system banks should constantly train and retain their managers on the principles of good lending.