This study assessed the effect of bank fraud on Nigerian economy field survey research methods were employed in the study. Data were collected from the financial statements of the selected banks in Nigeria This study adopted both descriptive and inferential statistics to achieve the stated objective. The descriptive statistics used included measures of central tendency such as mean, maximum and minimum and measure of variability such as, variance and standard deviation. The inferential statistics adopted was OLS Model –Multiple Linear Regression Analysis. Customers’ deposits and Bank distress were regressed on the various explanatory variables to determine the impact of banking fraud on the Nigerian economy. The study established that the relationships are significant and that the models can be used for meaningful analysis and decision making. Again it was ascertained that there is a great level of interaction between bank fraud and economic development of Nigeria. This research work has attempted to highlight the incidence and magnitude of fraud and some of its negative impact on the Nigeria economy. Fraud inflicts severe financial difficulty on banks and their customers. The study recommended that banks need to strengthen their internal control systems to be able to detect and prevent fraud and fraudulent activities and to protect its assets. The regulatory and supervisory bodies of banks in Nigeria need to improve their supervision using all tools at their disposal to appropriately check and curtain the incidence of fraud and fraudulent practices in the banking industry in Nigeria.