The Central Bank of Nigeria has proposed tougher sanctions for individuals who repeatedly issue dud cheques, introducing an automatic five-year ban for every subsequent offense once a customer has been flagged as a serial issuer.
The new measure 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 industry review. The draft seeks to tighten compliance, reinforce financial discipline and restore trust in cheque transactions, which regulators say continue to be widely abused despite long-standing legal controls
The guideline, issued under the CBN Act 2007 and the BOFIA 2020 framework, replaces all previous circulars on dud cheques and sets out stricter obligations for banks and other financial institutions. According to the document, once a cheque is confirmed to be a dud because the issuing account lacks sufficient funds, the concerned bank must file a report to the Credit Risk Management System and two licensed credit bureaus within one hour. The bank is also required to inform the customer within two working days, using a verifiable communication channel, and retain a copy of the dishonoured cheque for a minimum of five years. Financial institutions must additionally alert account holders to the consequences of issuing dud cheques before issuing cheque books, a measure designed to curb misuse at the point of onboarding.
Under the proposal, a customer becomes a serial dud-cheque issuer after issuing three dud cheques across the banking system. Once flagged, the CRMS will immediately notify all financial institutions, triggering restrictions that bar the customer for five years from using the clearing system, opening current accounts or accessing credit. The issuing bank must also update the customer’s status with private credit bureaus and notify the individual of the classification within two working days.
One of the most consequential clauses concerns repeat offenders who return to the system after completing their initial ban. The draft states that any customer who issues another dud cheque after being removed from the database will face a renewed five-year ban each time the offence occurs. This provision effectively creates an indefinite sanction cycle for chronic offenders, potentially excluding them from the formal financial system for prolonged periods.
The guideline also introduces penalties for banks, microfinance institutions and other regulated entities that fail to comply with reporting and documentation requirements. Infractions such as failure to report a dud cheque within the stipulated timeframe, failure to notify customers, opening accounts without status checks or failing to cancel unused cheque leaves attract fines ranging from N1m to N5m per incident. Credit bureaus may also face penalties of up to N2m for failing to maintain accurate and complete data on dud-cheque issuers.
The exposure draft will remain open for stakeholder submissions for three weeks through the CBN website, with feedback directed to the Financial Policy and Regulation Department. The apex bank maintains that the revised guideline is intended to protect the financial system, improve accountability and enhance overall confidence in cheque-based transactions, a development that could affect both individuals and MSMEs that rely on cheque payments for business operations.
