Central Bank Sets 5-year Ban For Serial Dud Cheque Issuers

The Central Bank of Nigeria has issued new guidelines on the treatment of dud cheques, introducing tougher sanctions for account holders who issue cheques that bounce due to insufficient funds. With the draft guideline, dud cheque issuers will face a five-year ban.

The exposure draft, dated November 24, 2025, outlines the procedures banks must follow, the penalties for non-compliance, and the reporting requirements aimed at tightening control over cheque misuse across the financial system.

The guideline stated that “a customer shall be classified as a Serial Dud Cheque Issuer if he or she has issued three dud cheques for insufficient funds within the banking industry.” Once placed in this category, the customer faces a five-year bar from key banking services. These include access to the clearing system, the ability to obtain credit from any financial institution and the right to open a current account during the sanction period. The guideline also mandates banks and other financial institutions to cancel all unused cheque leaves held by such customers.

The draft guideline adds that the sanction applies repeatedly where the offence is repeated. It states that “where a customer previously barred is removed from the database and subsequently issues another dud cheque, the customer shall be barred for another period of five years.” The central bank stated that the new measures are designed to reinforce discipline in cheque usage and close the gaps that have allowed repeated infractions despite the existing Dishonoured Cheques (Offences) Act.

To ensure full compliance, the guideline assigns clear responsibilities to financial institutions and imposes strict financial penalties for breaches. It provides that “failure to enforce the restrictions on a Serial Dud Cheque Issuer shall attract a minimum penalty of N5 million per infraction.” Banks that open a current account without conducting the prescribed status checks will pay “a minimum penalty of N3 million per infraction.” Institutions that fail to cancel remaining cheque leaves of barred customers will pay not less than “N2 million per infraction.”

Banks must also maintain accurate and updated records on the status of customers who have issued dud cheques. The guideline specifies that “failure to render required returns or update customer records shall attract a minimum penalty of N2 million per infraction.” Senior compliance officers are directly responsible for monitoring adherence to these rules, and the document states that they may be held liable for breaches in accordance with their assigned roles.

The guidelines introduce strict due diligence procedures for opening current accounts. Before a current account can be opened, a bank must verify the customer’s status in the CBN’s Credit Risk Management System (CRMS) and consult with at least two private credit bureaus.

Banks are also expected to ensure that customers understand the consequences of issuing dud cheques. The guideline requires that “PFIs shall ensure that customers are fully aware of the sanctions before issuing cheque books.”

The guidelines also stipulate new reporting obligations for all financial institutions, stating that “a PFI shall report a dud cheque within one hour on the CRMS or any platform approved by the CBN,” and must also forward the same information to at least two private credit bureaux. Banks are further required to notify the customer within two working days, providing details of each returned cheque through a verifiable communication channel.