NIGERIANS today are trapped under the rubble of a massive economic collapse. They are on the ropes, struggling for breath, with no relief in sight. They just can’t breathe! From one administration to the next, the refrain remains the same: agony is the song; pain’s the game.

Yes, much of the blame belongs to government. Poorly conceived policies or badly executed ones inevitably spell economic disaster. But there is something more ominous; there is something more insidious; something more destructive, something that is strangling Nigeria faster than any government – no matter how inept or ill-motivated.

That menace is the banking system as it is presently configured. It poses an economic and existential threat far greater than any government in Nigeria. Its punches are more direct, its wounds more personal, felt in every home and borne by every citizen.

This is why the government – and indeed every Nigerian – must act, and act now!

How Nigerian banks betray trust

Not long ago, a client of mine – a company with obligations to its foreign partners – needed foreign exchange (forex). It did what any responsible business would do: purchased dollars from the open market at N1,260/$1, deposited the funds into its domiciliary account with one of Nigeria’s biggest banks, and instructed the bank to pay its partners abroad.

The bank failed. No explanation. No warning. Silence. After days of chasing shadows and weeks of frustration, the truth emerged: the bank claimed that part of the funds in the account had originated from a third party. This third party, we were told, had colluded with bank officials, hacked into the bank’s forex platform, and purchased dollars at a fraudulent rate of N460/$1. My client was stunned.

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But the real shock came next. The bank offered to “buy back” my client’s dollars – not at the legitimate rate of N1,260/$1, but at N460/$1, the fraudulent rate it had willingly allowed. In plain terms, the bank wanted to punish an innocent customer for fraud committed by its own personnel.

My client refused. The consequences were severe. Foreign partners, unpaid and unimpressed, began to see my client as dishonest and unreliable. Its reputation tanked. The bank did not care.

My client’s mandate to me was simple: expose this abuse; make sure, very sure, that the bank never repeats it on another customer. So, we sued.

Under oath, the bank claimed it had obtained a court order freezing my client’s account. But the facts told a damning story: the bank had dishonoured the mandate weeks before that banks alleged case even began. Worse, my client was not a party to the order, and its account was not even mentioned in the proceedings. This was not just negligence. It was disdain – for its customers, and for our system of justice. Of course, we exposed the inanity of their case. They hurriedly settled. Paid my clients dollars in full.

And then, almost as if to underscore the rot, news broke. Following investigations by the House of Representatives Committee, the Inspector-General of Police indicted a commercial bank for concealment, fraudulent false accounting, money laundering, fraud, and a lack of transparency in the handling of a customer’s account.

I do not presume guilt, but perception is reality. And the reality is this: to ordinary Nigerians, our banking halls have become cesspools of malpractice, fraud, and impunity. Every day, citizens and businesses alike bear the pain of these abuses. Every day, trust in the banking system erodes a little further. And every day, the silence of regulators emboldens the rot.

How long can we endure a system where the very institutions meant to safeguard trust are the first to betray it?

Why do banks exist?

In the beginning, people secured their wealth in the simplest of ways. Ancestors dug pits in barns, in gardens, and at hidden corners of their homes to store money – keeping it away from thieves, robbers, or simply saving it for a rainy day. But these crude safekeeping methods came with serious risks. In cases of death or disability, dependents often could not access the hidden funds. Many of these stashes rotted away, fell prey to termites, or were simply lost forever. Worse still, when money was withdrawn from circulation and buried, the economy lost the chance to multiply wealth.

Banking evolved as the answer to these problems. With banks, individuals no longer needed to dig pits or hire guards. They could deposit their money in utmost faith that the bank would return it on demand. In exchange, banks assumed the responsibility of safety and redelivery.

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But banks do more than store money. Their primary role in the economic matrix is to connect lenders and borrowers. Depositors’ idle funds are deployed to manufacturers, traders, and service providers – people with the skills and tools to produce, but not always the cash. Those funds fuel production, create jobs, generate wealth, and return to the bank with interest. This cycle – the circulation of money – is the orbit on which modern economies turn.

Any break in that chain is catastrophic. Which is why malpractices that threaten the safety of deposits – or the availability of funds on demand – are not mere errors; they are daggers thrust into the very heart of a modern economy. And this is why responsible governments, regulators, and central banks must care deeply. Without deposits, there is no banking. Without banks, there is no economy.

The bank’s duty

At its core, a bank owes its customers a duty of reasonable care and skill in executing instructions. The Supreme Court has been unequivocal: this duty spans the full range of banking transactions within the banker-customer relationship. Above all, the bank must protect the customer’s interests and safeguard the customer’s funds.

In Lucius Nwosu v. Zenith Bank Plc (2015) 9 NWLR (Pt. 1464) 314, at 334 (D–E), the Court reaffirmed this principle:

“The most fundamental of the bank’s duty is to honour, without delay, its customer’s cheques to the extent of the balance standing to his credit or if the cheque is within the limits of an agreed overdraft…”

This duty to repay on demand is the hinge on which every other duty swings. It is the foundation that makes every other banking service possible and purposeful. Remove it, and the banking institution itself collapses. And when banks collapse, the entire modern economy follows.

It is no surprise, then, that from the temple loans of antiquity to the merchant banks of Renaissance Italy, banking has always been grounded in ethics, trust, and accountability.

Notably, the Supreme Court has defined a ‘cheque’ broadly to include not just paper instruments, but all forms of mandates – teller instructions, counter cheques, electronic transfers, even emails – provided they are validly issued in the course of banking. Any refusal or undue delay in honouring such mandates is not just a breach of contract; it attracts legal consequences.

In summary: the very reason banks exist is to safeguard deposits and make them available on demand. When they fail in this duty, they do not merely wrong an individual customer – they imperil the foundation of the entire economy.

What are legal ramifications of an ethical breach by a bank?

The law frowns heavily at the dishonour of cheques or mandates. Whether the dishonour arises from a customer’s insufficient funds (a “dud cheque”) or from bank malfeasance, the consequences are grave.

On the one hand, the customer carries strict liability. Under Section 1 of the Dishonoured Cheques (Offences) Act, any customer whose cheque is dishonoured for lack of funds faces two years’ imprisonment without an option of fine. The Supreme Court recently reaffirmed this position inOjeh v. FRN (2023) 5 NWLR (Pt. 1876) 1.

On the other hand, where the dishonour flows from the bank’s own wrongful act, the law provides no criminal sanction against the bank. But the courts have consistently imposed substantial civil liability – damages. In Union Bank of Nigeria v. N.M. Okpara Chimaeze (2014) 9 NWLR (Pt. 1411) 166, the Supreme Court held that the mere dishonour of a customer’s cheque is inherently discrediting and injurious. The Court reasoned that even the wrongful refusal of a draft for a small sum signals that the banking community has little confidence in the customer, thereby wounding reputation. Where the customer is in trade, the injury is magnified: damages for harm to credit/reputation are at large, and courts are free to award substantial compensation – even without concrete evidence of actual loss.

The principle is clear: wrongful dishonour by a bank is not a trivial lapse; it is a calculated blow to a person’s credit or good name, confidence, and livelihood.

Have Nigerian banks abused enormous powers?

Experience tells a troubling story. Nigerian banks have not only failed in their sacred duties, but too often they have abused their enormous powers with reckless impunity. They have been found forging documents, concocting falsehoods, disregarding clear customer instructions, suborning perjury, and expediting the collapse of customers’ businesses.

As earlier illustrated, when funds are stolen from their own vaults – whether through negligence, connivance, or outright fraud – banks are quick to invent stories and shift the burden to the innocent depositor. Instead of taking responsibility, they seek to foist the consequences of their incompetence or malfeasance on the very customers who trusted them.

This is not error. This is abuse.

Economic consequences of breach

The role of banks in a nation’s economic life cannot be overstated. A failure of trust in the banking system is not merely a private injury; it is a public crisis. As Jeanne Gobat, Senior Economist in the IMF’s Monetary and Capital Markets Department, observed in her article “Back to Basics” (IMF website):

“A well-operating payments system is a prerequisite for an efficiently performing economy, and breakdowns in the payments system are likely to disrupt trade – and, therefore, economic growth – significantly.”

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When banks dishonour mandates wrongfully, they do not just injure a customer; they shake the very foundations of trade, disrupt the flow of commerce, and weaken the arteries through which economic life circulates. A banking system that treats depositors with disdain is one that strangles the economy it was meant to serve.

Need for reform

Banks wield immense power and influence over the lives of ordinary people. In the memorable words of Professor Emeka Chianu, “They preside over the toil of millions of persons – rich and poor; literate and illiterate, astute and stupid.” Yet, despite this enormous control (of banks and their employees) over the lives and livelihood of their peers, there is shockingly little statutory or regulatory balance of power between banks and their customers.

Most provisions in our banking laws are designed to protect banks themselves: ensuring liquidity, regulating reserve ratios, or preventing staff from granting unauthorized loans that may harm the institution’s balance sheet. But not a single statutory safeguard speaks directly to protecting customers against fraud, negligence, or undue influence by the banks and their officials. The depositor – the weaker party in almost every case – is left to the cold remedies of contract and common law.

This imbalance has fuelled decades of abuse. Most customers are too uninformed, too poor, or too weak to fight back. Those who dare often lack the resources to hire experienced counsel – or their very funds have already been frozen or siphoned off by the banks. Even when they muster courage to litigate, they are crushed by procedural bottlenecks, endless adjournments, and ponderous litigation that favours the stronger party.

But Nigeria’s economy cannot survive this onslaught for long. The abusive dynamic between banks and their customers is a ticking time-bomb. Banking reform is not optional – it is an emergency.

Towards new banking order

The National Assembly and the Executive must act with urgency. Statutes like the Central Bank of Nigeria Act (CBN Act), the Banking and Other Financial Institutions Act (BOFIA), and the Dishonoured Cheques Act must be retooled. The Central Bank must be vested with real, enforceable powers to discipline banks and their directors/officers for wrongs against customers – not just against the banks themselves. Penal provisions must be expanded to cover wilful breaches of customer accounts, not merely internal liquidity risks. Depositors must matter.

The Investments and Securities Act (ISA) provides a living paradigm. Its framers armed the Securities and Exchange Commission (SEC) with genuine authority to protect investors and punish erring capital market operators. Under sections 66 and 305, directors and managers can be held personally liable – civilly and criminally – where violations occur with their connivance or negligence. The SEC’s Administrative Proceedings Committee (APC) has resolved numerous disputes quickly and decisively – cases that, had they arisen in the banking sector, would have been dragged endlessly through the courts. Why should banking customers not enjoy similar protection?

Lawmakers must consider establishing an independent Ombudsman for banking disputes or complaints – an accessible forum where customers – particularly those with small, simple claims – can get prompt, fair redress without the delays and expense of full litigation.

Role of judiciary

The judiciary also has a role. Judges must appreciate that banking disputes are overwhelmingly documentary in nature. Procedures like Originating Summons – already available under existing rules – should be embraced to deliver speed and justice. Writs, oral testimonies, and protracted trials often play into the hands of banks with deep pockets, or debtors looking to stall recovery. Expeditious resolution will keep both banks and customers accountable.

Section 32 of BOFIA already empowers the CBN Governor to investigate a bank’s affairs where it is in the public interest, where a depositor makes a complaint, or where the bank conducts business in a manner detrimental to depositors. That power must be used decisively in cases of substantial complaint. The recent indictment by the Inspector General of Police of a commercial bank for concealment, fraud, and false accounting is precisely the kind of matter that should trigger such intervention.

The media must also step up. The fight against abusive banking cannot be left to lawmakers, regulators, and judges alone. It is a collective battle. History reminds us that the downfall of Charles Ponzi – whose name has become synonymous with fraud – was triggered not by regulators or law enforcement, but by the relentless investigative reporting of Richard Grozzier and the Boston Post. This reporting led to Ponzi’s conviction, prompted sanitization of the capital market, the banking system and ultimately drove changes in the relevant laws. Nigerian journalism must rediscover that tradition of public service by exposing the rot in our banks.

Conclusion

Banks exist because of trust. They thrive because depositors believe that their money will be safe and available on demand. When that trust is betrayed, not only is the individual customer ruined – the entire economy is imperilled.

Nigeria cannot afford a banking sector that feeds on its people. We cannot build prosperity on institutions that sabotage livelihoods with impunity. Reform must come, and it must come now – through law, through regulation, through the courts, and through the vigilance of the media and the public. For if banks are the lifeblood of the economy, then abusive banking is nothing less than a cancer. And cancers, if left unchecked, do not heal themselves – they consume the body until it collapses.

The time to act is not tomorrow. It is today. It is now.

Rowland Uzoechi, a Lagos-based lawyer, and partner at Peach & Bonds LP, writes on banking, finance, and commercial law. He can be reached at [email protected]