The Central Bank of Nigeria (CBN) has unveiled a stringent new proposal aimed at curbing the persistent issuance of dud cheques across the financial system. Under the new rules, individuals who repeatedly issue cheques that bounce due to insufficient funds may face an automatic five-year ban — a sanction that will also apply again for every subsequent offence.
The proposal is contained in an exposure draft titled Guidelines on the Treatment of Dud Cheques by Banks and Other Financial Institutions in Nigeria, released on Monday for comments from stakeholders and industry operators. The CBN noted that despite long-standing legislation discouraging the practice, dud cheques remain a recurring problem, eroding public trust in cheque-based transactions and affecting the integrity of the financial system.
The revised guideline, issued pursuant to the CBN Act 2007 and the Banks and Other Financial Institutions Act (BOFIA) 2020, is designed to tighten reporting requirements, strengthen compliance, and protect the payments ecosystem. Once adopted, it will replace all previous circulars and directives on the subject.
Under the framework, banks and other financial institutions must adopt stricter monitoring and reporting procedures. Whenever a bank confirms that a cheque has been dishonoured due to insufficient funds, it must report the incident to the Credit Risk Management System (CRMS) as well as at least two licensed private credit bureaus — and this must be done within one hour of confirmation. This is a significant acceleration from previous reporting timelines.
Banks are also required to inform the customer responsible for the dud cheque within two working days, using a communication channel that is fully traceable. Each financial institution must also keep copies of all dishonoured cheques for a minimum period of five years, ensuring availability for audits and regulatory inquiries. Before issuing cheque books, banks must clearly educate customers on the consequences of issuing cheques without adequate funds.
A major highlight of the draft is the automatic blacklisting of any customer who issues three dud cheques within the banking system. Once a customer crosses this threshold, the CRMS will immediately alert all banks, categorizing the individual as a “serial dud cheque issuer.” The reporting bank must then notify the customer in writing and update the individual’s status at private credit bureaus.
The consequences are severe: serial offenders will be barred from accessing the cheque clearing system, prohibited from opening current accounts, and blocked from obtaining loans or credit facilities from any bank or financial institution for a period of five years. This effectively constrains the customer’s participation in the formal financial sector.
Even more stringent is the provision for repeat offenders. If a previously barred customer completes the five-year restriction period but later issues another dud cheque at any time, the individual will automatically incur another five-year ban. The renewed ban applies each time the offence is repeated, with no maximum limit. This means a chronic offender could be shut out of the financial system for a decade or even longer.
The guideline also prescribes penalties for non-compliant institutions. Banks that fail to report dud cheques within the stipulated timeframe, neglect to notify customers, open accounts without carrying out mandatory status checks, or fail to withdraw unused cheque leaves face fines ranging from ₦1 million to ₦5 million per incident, depending on their category. Private credit bureaus are not exempt; they may face penalties of up to ₦2 million for failing to maintain accurate records of reported offenders.
The CBN emphasized that the proposed framework is part of broader efforts to discourage financial misconduct, safeguard the credibility of the payments system, and enhance corporate responsibility across the industry. Stakeholders have three weeks to submit comments, suggestions, or objections to the Director of the Financial Policy and Regulation Department via the CBN’s designated channels.
The proposal signals the CBN’s intent to eliminate habitual issuance of dud cheques and reinforce financial discipline, ensuring that cheque transactions remain reliable and credible within Nigeria’s evolving financial landscape.
