The Central Bank of Nigeria (CBN) has proposed wide-ranging punitive measures to combat the rising frequency of dud cheques, including automatic and repeated five-year bans for individuals who frequently write cheques that bounce due to insufficient amounts. The provision, which is included in a newly issued exposure document titled Guidelines on the Treatment of Dud Cheques by Banks and Other Financial Institutions in Nigeria, is one of the most comprehensive regulatory initiatives taken in recent years to restore public trust in cheque-based transactions.
The proposed guideline, released under the CBN Act 2007 and the Bank and Other Financial Institutions Act (BOFIA) 2020, supersedes all earlier circulars on the handling of defective cheques. It aims to reduce reporting times, enhance transparency, and restore strict financial discipline among banks and other financial institutions.
According to the draft, banks must report every dud cheque—one that is dishonoured due to a lack of funds- to the Credit Risk Management System (CRMS) and at least two private credit bureaus within one hour of detection.
Financial institutions are also required to notify the affected consumer within two working days via a reliable method, outlining the reason for the dishonour.
To maintain transparency and future reference, every bank must keep a copy of any dishonoured cheque for at least five years. Banks must also educate all prospective cheque users on the implications of issuing bad cheques before giving cheque books.
The designation of "serial dud cheque issuers" is an important aspect of the regulations. A consumer becomes one after issuing three bad checks through the banking system. Once classified, the CRMS will notify all banks and financial institutions, resulting in immediate system-wide limitations.
The reporting bank must notify the customer of their changing status within two business days and verify that the classification is consistent across all credit bureaus. Individuals categorized as serial offenders will be barred from accessing cheque-clearing services, creating current accounts, or getting loans from any financial institution for a minimum of five years under the new penalties regime.
Perhaps the most remarkable feature is the possibility of a renewed sentence for repeat offenders. According to the proposal, if an individual issues another bogus cheque after serving a previous five-year penalty, they will be barred for another five years for each consecutive violation. This establishes an infinite penalty cycle, capable of permanently barring chronic violators from the formal financial system.
The proposed guideline does not exempt financial firms. Banks that fail to meet their obligations, such as failing to report incidents promptly, failing to notify customers, issuing accounts without conducting CRMS checks, or failing to cancel unused cheque leaves, will face fines ranging from N1 million to N5 million per violation, depending on the institution.
Credit bureaus may also face fines of up to N2 million for failing to keep accurate and up-to-date data of fake cheque issuers. The CBN has opened the exposure draft for stakeholder feedback for three weeks. The paper, which is available on the apex bank's website, requests submissions to the Financial Policy and Regulation Department.
The new structure, according to the central bank, is meant to deter systemic misuse, boost the payments system's integrity, and impose greater accountability throughout the industry. If accepted, the guideline has the potential to transform Nigeria's financial responsibility culture, ushering in a harsher period for cheque users who break the rules and institutions that fail to enforce them.
