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The Central Bank of Nigeria (CBN), under the governance of Olayemi Cardoso, has issued a new draft guidelines that is tougher, stricter, and more stringent. The Apex bank has proposed a regulatory framework that'll bar individuals who issue multiple dud cheques from accessing some banking services for straight five years.
The new exposure draft has been released on Monday for public review and feedback, and if the proposal is approved, anyone classified as a “serial dud cheque offender” will be barred from using the cheque clearing system for five years. Meanwhile, not only that, the sanctions also go well beyond cheque issuance.
Offenders will also lose access to credit facilities, meaning they cannot obtain loans from any bank during the sanction period. In addition to that, they will be blocked from opening new current accounts, and banks will be required to retrieve all unused cheque books from them.
Definition of Concepts:
Dud Cheques: A dud cheque is a cheque that is dishonored because of there's no sufficient funds in the customer account to process the cheque request.
A serial dud cheque offender: Is anyone who has issued three cheques returned or bounced for insufficient funds.
The cheque clearing system: Is the banking process that allows cheques issued by one bank to be verified, processed, and settled between different financial institutions. When someone deposits a cheque, the clearing system checks whether the issuer’s account has enough funds, confirms the cheque’s authenticity, and ensures the money is transferred from the issuer’s bank to the recipient’s bank. It is essentially the behind-the-scenes network that ensures cheques are honored and funds move accurately and securely between banks.
The proposed directive is titled "Guidelines on the Treatment of Dud Cheques by Banks and Other Financial Institutions in Nigeria." This proposed bill is not only going to affect individuals, in fact, banks and other financial institutions like credit bureaus, and Credit Risk Management System (CRMs) will also take part in the sanction if they fail to comply.
What the Proposed 5-Year Ban Covers
Denial of Clearing System Access
CBN proposed that the policy would bar “serial” dud cheque issuers from using the cheque clearing system, and place the offender in an automatic five-year ban each time a repeat offence occurs. The draft states that once a bank or any participating financial institution discovers that a cheque is a dud, it must report the incident to the Credit Risk Management System (CRMS) and at least two private credit bureaus within a timeframe of one hour.
After reporting to the CRMS and at least two private credit bureau, the bank must also send a message to the affected customer—through a reachable means of communication channels—informing him or her about the dishonored cheque and providing full details about the consequences that follow. In addition to that, the bank must retain a copy of the dishonored cheque for five-year. The draft also states that banks must enlighten all new and existing customers about the consequences of issuing dud cheques before issuing cheque books.
CRMS Notifies All Financial Institutions
Once a bank or participating bank discovers a dud cheque, the bank report to the CRMS and the CRMS record the account holder details and then notifies all financial institutions with the details so that the five years restriction can be severe across all banks in the country. It's now banks' responsibilities to check their customer's status in CRMS before opening a current account.
Consequences and Fines
Speaking of which, not allowing to open a current account is also part of the consequences imposed by CBN for serial dud cheque issuers. They also can’t open new current accounts during the five-year sanction, and their banks are required to “retrieve unused cheque leaves” from them. Banks that fail to enforce these restrictions can be fined N1m to N5m per incident, depending on the institution type.
The draft explicitly says that banks will be fined N3 million for opening a current account without checking the customer's status in CRMS. There is also a minimum fine for not enforcing returned-cheque charges. In addition to that, offenders would be barred from obtaining credit from any bank for the five-year period. You know that their names have been recorded on the CRMS and with at least two private credit bureaus. So, it's now also the responsibilities of credit providers to check customers status on the credit bureaus before offering loans.
The Credit Bureau agencies can also be fined as much as N2 million if they fail to keep or supply full details on individuals issuing bounced cheque. So, everyone—including the individual that issued dishonored cheque, bank that failed to do the necessary tasks after discovering dishonored cheque, and credit agencies who fail to update their database to include the details of individuals that are on the five sanctions or exclude the details of who have finished their sanctions—have their own consequences.
Furthermore, if offender reoffends by issuing more dud cheques after completing a five-year ban, another 5-year ban will be applied each time they reoffend. Note, CBN can only lifting the ban at the end of the five-year period or if there’s verified erroneous reporting. There is no explicit upper limit on how many times the ban can be renewed. The ban is “automatic and repeatable,” meaning persistent offenders could be barred indefinitely through repeated 5-year cycles.
Final Notes
This CBN's exposure draft titled Guidelines on the Treatment of Dud Cheques by Banks and Other Financial Institutions in Nigeria is not entirely new; the Apex bank had a circular in 2015 that already did some of these things. In that 2015 circular, serial dud cheque issuers were to be barred from clearing and from credit access for 5 years, and their names were supposed to be put on CRMS and credit bureaus.
However, the new guideline, issued under the CBN Act 2007 and BOFIA 2020, replaces all earlier circulars on dud cheques. According to the Apex bank, the new guidelines will be a codification for those earlier rules—with some sharper enforcement around current accounts and repeated offenses. The guideline seeks to enhance reporting requirements, promote greater fiscal responsibility, and rebuild trust in cheque usage in Nigeria.
The CBN says all these factors are what remain prone to misuse even as existing regulatory prohibitions are in place. The apex bank also say these policies are also part of its push to strengthen financial discipline, rebuild trust in Nigeria’s payment system, and reduce fraudulent activities linked to cheque misuse. Although, some analysts believe the tougher approach will deter habitual offenders, and others argue that the extension of the restrictions to credit access could bring up debates on proportionality and consumer fairness.
Nevertheless, the CBN has invited stakeholders, including banks, businesses, and members of the public, to submit feedback before the guidelines are finalized. The exposure draft is opened for comments for three weeks and it can be accessed on the CBN official website. In addition to that, submissions are to be directed to the Director of the Financial Policy and Regulation Department.
