The Central Bank of Nigeria (CBN) has, in a new exposure draft titled ‘Guidelines on the Treatment of Dud Cheques by Banks and Other Financial Institutions in Nigeria,’ proposed a five-year ban for individuals who repeatedly issue dud cheques.
The guidelines, released on Monday for industry feedback, also proposes an automatic five-year ban each time a repeat offence occurs.
The draft document is open to stakeholder comments for three weeks and is available on the CBN website. Submissions are to be directed to the Director of the Financial Policy and Regulation Department.
The CBN maintains that the revised guideline is part of efforts to deter abuse, protect the payments system, and ensure better compliance across the industry.
The document aims to tighten reporting standards, strengthen financial discipline and restore confidence in the use of cheques, which the CBN says continue to be abused despite long-standing legal restrictions.
The guideline, issued under the CBN Act 2007 and BOFIA 2020, replaces all earlier circulars on dud cheques.
According to the draft, once a bank or any participating financial institution establishes that a cheque is a dud, such a financial institution must report the incident to the Credit Risk Management System (CRMS) and at least two private credit bureaus within one hour.
It further outlined that banks must also notify the customer within two working days through a verifiable communication channel, providing full details of the dishonoured cheque.
The CBN said every bank must retain a copy of the dishonoured cheque for at least five years and must inform all customers of the consequences of issuing dud cheques before issuing cheque books.
Under the proposed guidelines, a customer becomes a “serial dud cheque issuer” after issuing three dud cheques across the banking system.
Once classified, the CRMS will instantly notify all financial institutions, triggering severe restrictions.
The reporting bank must then notify the customer within two working days and update their status with private credit bureaus.
Under the sanctions framework, serial offenders will be barred for five years from accessing the clearing system, opening current accounts, or obtaining credit from any bank or financial institution.
The most far-reaching provision concerns customers who reoffend after completing their initial ban.
The guideline states that if a previously barred customer issues another dud cheque after being removed from the database, the person “shall be barred for another five-year period in each instance.”
This means the ban is renewable with no upper limit, effectively locking persistent offenders out of the financial system for extended periods.
The guideline also imposes strict penalties on banks that fail to comply. Infractions such as failure to file reports, failure to notify customers, opening accounts without conducting mandatory status checks, or failure to cancel unused cheque leaves attract penalties ranging from N1 million to N5 million per incident, depending on the institution type.
Credit bureaus also face penalties of up to N2 million for failing to maintain or provide complete records of dud cheque issuers.
