CHAPTER FOUR:

DUTIES AND LIABILITIES OF BANK/ CUSTOMER RELATIONSHIP

4.1 Banker: Duties towards its Customers.

There are a number of basic obligations that are owed by the banker to the

customers bases on the contract, common law and the statute. These responsibilities play

a critical role in upholding trust and transference in the banking system 1. Among the

major responsibilities of a banker is the obligation to accept cheques of customers, in

case the cheques are duly drawn and there is enough cash in the account. Lack of doing

this can be loss of dishonour. The banker too is under obligation of secrecy in which it

must ensure that the information services related to customers are not disclosed contrary

to it. This obligation was set in Tournier v National Provincial and Union Bank of

England and is common in the banking practice of Nigerians. This obligations of

confidentiality is supported by the privacy protection under Section 37 of the Constitution

of the Federal Republic of Nigeria 19992.

The banker also owes a duty of care in performing the instructions of the

customers, thus coming with proper and careful transactions that have been executed

correctly. The Banks and Other Financial Institutions Act obliges a bank to conduct in a

prudent and professional way to safeguard the interests of the customers 3. The banker

must also be obligated to present the right account statements to the customers to allow
1
Umeh, C. (2022). Banking regulation and customer protection in Nigeria. Journal of Financial Regulation.
2
Akinola, O. (2021). Debtor-creditor nature of banker-customer relationship in Nigeria. Nigerian Journal of
Commercial Law.
3
Hassan, R. T. (2021). Bank secrecy and confidentiality obligations in Nigeria. International Journal of
Law, Policy and the Family.
 them to watch their financial transactions as well as to identify abnormality. The other

responsibility is that you should do what the customer has mandated you to do especially

in agency based transactions where the bank is doing what it is told to do. Regulatory

control is enabled by the central bank of Nigeria Act that guarantees that banks do not

malpractice customers in the context of maintaining the standards in the operation4.

Summing up, the role of the banker is basically meant to facilitate trust, efficiency

and accountability in the banker customer relationship. The banker owes good faith in

everything he or she transacts with customers5. This obligation demands truthfulness,

impartiality and openness in carrying out banking operations. The banker is also

supposed to show ordinary skill and care in the way he or she carries out financial

instructions especially in the signature verification and granting of payment. Banks have

the responsibilities to ensure that there are healthy banking practices under the Banks and

Other Financial Institutions Act which preserve the funds of customers and ensure

financial stability6.

It is the responsibility of the banker not to act negligently when dealing with

accounts of the customers because negligence can cause him to lose money and incur the

liability of law. It is also necessary that the responsibility to record the correct

information is taken since the correct documentation prevents conflicts and

responsibilities are taken. The banker should abide by regulatory requirements given by

4
Abubakar, S. (2024). Regulatory oversight of banking relationships in Nigeria. Journal of Banking and
Financial Law.
5
Okafor, C. E. (2022). Banker-customer confidentiality under Nigerian banking law. International Journal
of Law and Management.
6
Abubakar, S. (2024). Regulatory oversight of banking relationships in Nigeria. Journal of Banking and
Financial Law.
 Central Bank of Nigeria as stipulated in Central Bank of Nigeria Act. 7 The other

responsibility is to provide customer account security, such as safeguarding against

unauthorized and cyber fraud. When there are suspicious activities on their accounts

including possible fraud, the banker must inform the customers of the same. These

responsibilities are strengthened by the Constitution of the Federal Republic of Nigeria

1999 (as amended) that safeguards the right to privacy under Section 37.

Finally, on top of the contractual obligations, the banker has other restrictions,

statutory, regulatory, and ethical duties. The banker has an ongoing obligation to uphold

the integrity of the banking system by making sure that all the transactions are duly

authorized through authorization before they are executed. This lies at the heart of

avoiding fraudulent debits of the customers. The banks have to establish internal control

mechanisms, which minimize chances of fraud and misconducts in managing the

customer money. It is also the responsibility of the banker to give prompt response to

complaints and questioning by customers about account matters. The Banks and other

financial institutions act, provides that banks have to operate in a way that safeguards the

depositors funds and promote financial soundness8. The banker must adhere to the anti-

money laundering requirement and in both cases, the transactions which are suspicious,

have to be adequately monitored and reported accordingly. Issues The prudential

guidelines issued by Central Bank of Nigeria under the Central Bank of Nigeria Act

obligates the banks to ensure a high standard of operation.

7
Central Bank of Nigeria. (2023). Banking supervision and financial stability report.
8
Nigeria Deposit Insurance Corporation. (2023). Annual report.
 Banks are also obligated to make sure that the charges charged to advantage

seekers are legal, transparent and also disclosed before being deducted. Lack of adequate

communication to customers of any deductions could set in as unfair banking practice

and breaking of regulation. Accountability in the Federal Republic of Nigeria 1999 (as

amended) is enhanced by the Constitution of the Federal Republic of Nigeria 1999 that

upholds the economic rights and privacy of personal data of the citizens. Finally, the

responsibilities of a banker are far reaching and are intended to guarantee trust, efficiency

and legality of any banking actions.

4.2 Duty of customers to the banker.

The banker also has a few legal obligations on the customer; these are brought

about by the contractual relationship existing between the two parties. Among the key

responsibilities of the customer are to be honest and present precise information during

opening a bank account and its operation. 9 The customer owes a responsibility of

exercising reasonable care in case of omitting mistakes in giving instructions like cheques

to prevent fraudulent dealings. To prevent cheques that are tampered with, customers

must ensure that they have enough amount of money in their accounts to facilitate

transactions. Nigerian banking laws under the Banks and Other Financial Institutions Act

require customers to adhere to all the legal banking requirements and procedures.

The customer is also required to notify the unauthorized transactions or

differences in his or her account within a reasonable time. Any failure to inform the bank

in time can be used to restrict the claims to damages or refunds by the customer. Bank

9
Abubakar, S. (2024). Regulatory oversight of banking relationships in Nigeria. Journal of Banking and
Financial Law.
 services should not be used by the customer to commit criminal acts like fraud, money

laundering, or financing of terrorism, as is regulated by financial laws and by CBN

rules.10 Central Bank of Nigeria Act facilitates these requirements by allowing the

regulators to impose compliance and punish misbehaviors. To sum it up, clients have the

obligations of honesty, care, and compliance that are crucial to the smooth operation of

the banking system. The customer is responsible to see that all instructions handed to the

bank are proper, clear and within the law to prevent errors in performance. The

customers will protect their banking products like cheque books, ATM cards and online

banking details.

Any loss or theft of banking instruments should be promptly reported by the

customer to avoid fraudulent transactions. Under the Banks and Other Financial

Institutions Act, customers must adhere to all the regulations and policies of the financial

institutions on banking. It is unfortunate that customers should not offer forged or

distorted instruments to be paid and this can be termed as criminal liability. It is also the

responsibility of the customer to utilize banking services in a responsible manner and

prevent engaging in any activity that can put the bank in legal or financial danger. The

customers are supposed to act on bank enquires about suspicious or unusual banking

activities swiftly. The inability to collaborate with the bank in the prevention of frauds

can lead to restricting or closing of accounts11.

Compliance measures are lawful through the Central Bank of Nigeria where the

Central Bank of Nigeria Act ensures compliance measures followed by consumers within
10
Ojukwu-Ogba, N. E. (2009). Banking sector reforms in Nigeria: Legal implications for banker-customer
relationship. Commonwealth Law Bulletin.
11
Agwor, C. I. G., & Amadi-Harry, N. (2025). Bank liability in banker-customer relationship in Nigeria: A
legal appraisal. Madonna University Journal of Law and Society, 9(1).
 the financial system. Finally, when it comes to preserving trust, security, and efficiency

in banking practices, customer roles play vital roles. The customer is responsible to make

sure that banking activities are carried out within the confines of the law and in line with

the financial regulations. It is the responsibility of the customers to ensure that they do

not carry out any activities which may jeopardize the security or reputation of the

banking institution. Customers should also ensure that they check the statement of their

accounts periodically to identify any mistake or fraudulent activity in their accounts in

time12.

In the Banks and Other financial institutions Act, customers are supposed to abide

by all the legal directions and practices that banks demand. Customers need to take care

when using digital banking platforms to avoid unauthorized access or cyber fraud. To be

effective, the customer must uphold current personal information with the bank to be in

communication with the bank and adherent. Lacking the process of updating such

information might lead to either restrictions of the account or delay of a transaction 13.

The Central Bank of Nigeria, according to the Central Bank of Nigeria Act, has

regulatory norms whereby customers must cooperate with the Central Bank of Nigeria in

upholding integrity of the financial system. Customers also need not give conflicting

orders that can complicate and slow down banking transactions. Conclusively, customer

responsibilities play a crucial role in facilitating unhindered, safe, and ethical banking

practices.

12
Nigeria Deposit Insurance Corporation. (2023). Annual report.
13
Hamzah, D. A., & Olatoye, A. (2022). Banker-customer relationship under e-banking regime: Nigeria in
context. Journal of Humanities, Education and Law, 5(1), 92–111.
 4.3 Breach of Duty

Breach of duty arises when either party (banker or the customer) does not perform

his legal or contractual duties in the banker-customer relationship 14. A typical illustration

is when a bank wrongfully honours cheques resulting in the bank being liable to pay

damages. The other one is breach of confidentiality where bank releases the information

of customers without legal reasons. These violations can result in civil and statutory

liability respectively under contract and as per the Banks and Other Financial Institutions

Act15. The Constitution of the Federal Republic of Nigeria, 1999 (amended) also offers a

solution in case of breach in which the fundamental rights have been violated like the

right to privacy or even property rights. Custodians might also violate responsibilities that

include writing cheques that lack adequate finances, and this results in dishonour and

illegal repercussions.

Criminal and civil liability The Nigerian law on this matter may be attracted by

fraudulent use on banking services by customers. The Central Bank of Nigeria through

the Central Bank of Nigeria Act has the authority to impose a ban on banks or customers

who engage in violations of the regulations16. Penalties imposed on breach involve

damages, cancellation of banking relations and regulatory fines based on severity of

breach. Conclusively, breach of duty compromises trust in the banking system and is

highly controlled according to the contract law, statutory provisions and constitutional

protection. Action and omission by both parties may constitute breach of duty under the
14
Olumide, A. O., & Temidayo, A. (2023). An examination of bankers’/customers’ relationship under
Nigerian law. Global Journal of Politics and Law Research, 11(5), 71–81.
15
Anushiem, M. I., & Ugwuanyi, T. O. (2024). Liabilities of bankers to their customers and third parties in
Nigeria. African Customary and Religious Law Review
16
Akaayar, S. V. (2024). Revisiting the legal and regulatory framework for banking business in Nigeria.
Journal of Commercial and Property Law.
 banker-customer relationship, though it will have the legal consequences 17. Among the

popular types of breaches is laxity on the side of the bank when handling transactions,

causing financial loss to the customer. The other violation is when the customers give

false information when opening their accounts or processing transactions. Banks that are

unable to meet the standards of operation are punishable by regulatory actions under the

Banks and Other Financial Institutions Act. In extreme situations, breach of duty can

result in termination of the relationship between bankers and customers and accounts can

be closed18.

Federal Republic of Nigeria 1999 Constitution (with amendments) also permits

the aggrieved parties to redress against the violation of property rights and privacy rights.

When banks do not even take reasonable security measures in preventing fraud on the

accounts of customers, they can also be liable to breach. Nigerian law imposes a civil

liability together with a criminal prosecution to the customers who commit fraudulent

acts. The Central Bank of Nigeria can also use the power of the Central Bank of Nigeria

Act to impose penalties on the financial institutions that default regulatory requirements.

To sum it up the breach of duty undermines the integrity of the banking system and it is

resolved by contractual and statutory measures and constitutional safeguards. A breach of

duty can occur in cases whereby one or both parties did not act in compliance with the

terms of the banker-customer contract or law which regulates the banking operations.

Banks can violate the obligation they do not promptly complete transactions unless there

is a genuine reason to do so. Banks are another type of breach, but they cannot protect the

17
Agwor, C. I. G., & Amadi-Harry, N. (2025). Bank liability in banker-customer relationship in Nigeria: A
legal appraisal. Madonna University Journal of Law and Society, 9(1).
18
Ojukwu-Ogba, N. E. (2009). Banking sector reforms in Nigeria: Legal implications for banker-customer
relationship. Commonwealth Law Bulletin, 35(4), 675–686.
 information of their clients, and hackers can obtain information without authorization or

employing cyberattacks. The Banks and other financial institutions act imposes the

punishment on banks that are no longer able to comply with the regulatory requirements

or that are not doing unsafe activities.

Customers can also commit breach of duty by acting in good knowledge by

issuing fraudulent instruments or by practicing deceptive banking. This behavior can be

attracted by both criminal liability according to the financial law of Nigeria and civil

liabilities. The Constitution of the Federal Republic of Nigeria 1999 (as amended) grants

the right to redress to the affected parties in case of infringement of their property rights

and the violation of their privacy. Under the Central Bank of Nigeria Act, regulatory

intervention by the Central Bank of Nigeria may involve imposing fines, suspension or

cancellation of banking licenses. Breach of duty also influences the financial security and

rise in economic conditions depending on the banking system that people trust. Finally,

the concept of breach of duty in banker-customer relationships is taken seriously and

solved under Nigerian law by means of legal, regulatory, and constitutional solutions.

4.4 Solutions to Violation of the Duty.

In the case of breach of duty in the relationship of banker and customer, the

wronged party is allowed to obtain legal damages as per the Nigerian laws. These

remedies are aimed at putting the injured party back to the position that they would have

been had the breach not taken place hence as much as possible 19. Damages are one of the

major remedies. Damages refer to the money damages granted to the person who is

19
Akaayar, S. V. (2024). Revisiting the legal and regulatory framework for banking business in Nigeria.
Journal of Commercial and Property Law.
 injured due to breach. Where cheques are dishonoured by a bank wrongly, the customer

can claim both general damages, and injury to reputation and financial inconvenience.

Regulatory sanctions can also be introduced against banks which do not discharge

statutory duties to the customers under the Banks and Other Financial Institutions Act.

The second remedy is the ability to sue due to breach of contract as the relationship

between the banker and the customer is more of a contractual nature. Declaratory reliefs

may also be granted by the court which ascertains the rights and liabilities of the

disputing parties. Where due, injunctions can be given to prevent a bank to proceed with

illegal actions towards the customer20.

Individuals also have the right to request that fundamental rights be enforced

under the Constitution of the Federal Republic of Nigeria 1999 (as amended), especially

in cases where there is infringement of privacy or property rights. The administrative

penalties may include fines or banking licenses suspension by regulatory bodies like

Central Bank of Nigeria through the Central Bank of Nigeria Act. In sum, solutions to

breach of duty are both legal and regulatory, which will protect customers and hold

accountability to banks. The other significant restitution that can be used in breach of

banker-customer duty is restitution which is used to recover any money or benefit taken

wrongly against the party which suffered the loss. When it comes to deductions that

customers do not authorize, the customers might demand to have the exact amount that

was taken illegally refunded21. In certain situations when a bank is obligated to fulfill his

or her contractual duty, specific performance may be ordered by courts as well.

20
Anifalaje, K. (2024). Legal issues in bankers’ duty of confidentiality in Nigeria.
21
Ogwemoh, K. M. A. (2023). Banker-customer relationship in Nigeria: Currency scarcity implications.
Mondaq Nigeria.
 Aggravated damages may also be awarded by the courts in case the breach happened in

bad faith and / or in a careless disregard of the rights of the customer. Regulatory bodies

can under the Banks and Other Financial Institutions Act get the banks to undo illegal

dealings. The legislature, Central Bank of Nigeria by the Central Bank of Nigeria Act, is

given authority to issue administrative penalties on rogue financial institutions.

Secondly, penalties like suspension of banking privileges can be used when there

are systematic violations. Customers can also submit complaints of breaches to regulatory

authorities to have them inquired and influenced. The Federal Republic of Nigeria plugs

constitutional support to implementation of rights to law by the constitution of the

Federal Republic of Nigeria of 1999 (as amended). Finally, remedies of breach are

detailed and comprise judicial, equitable and administrative reliefs which are aimed at

providing fairness and responsibility. 4.5 Dissolution of the Relationship between the

Banker/Bank and their Customers. Nigerian law has various ways of terminating the

bankercustomer relationship based on the conditions under which the account was

opened and based on the requirements of the contract. A mutual agreement between the

customer and the bank is one of the common forms of termination which is agreed upon

by both the bank and the customer to terminate the account. The customer can also

terminate the relationship by written request to close the account subject to the payment

of all the requirements to the bank22.

Equally, when the bank decides to end the relationship, it is supposed to provide a

customer with reasonable notice with the exception being where operations of the

22
Yusuf, E. E., & Bala, A. (2021). Empirical analysis of electronic banking satisfaction in Nigeria. arXiv.
 account can no longer be sustained 23. The banks under the Banks and other financial

institutions act must observe due process of closing customer account to prevent illegal

deprivation of property. The relationship can take an automatic end as well when a

customer passes away, then an account is bound by the estate administration laws. The

relationship is brought to an end in instances of insolvency or liquidation of the bank and

the claims of its customers are resolved by way of regulatory and judicial procedures 24.

According to the Central Bank of Nigeria Act, the Central Bank of Nigeria has the power

to revoke the license of a bank and all banker-customer relations come to an end.

Termination of the relationship could also be used by the bank in case of a customer

engaging in fraudulent activities as a way of preserving its integrity and adhering to

regulatory requirements. Summing up, the relationship between the banker and the

customer is terminated based on the principles of contract, statute and regulated

supervision to create a fair and lawful environment25.

The banker: This can also be terminated through breach of contract on the part of

either the banker or the customer, particularly in cases in which trust and confidence is

destroyed. An account can be lawfully closed by a bank in light of a suspicion of a

fraudulent activity or illegal transactions. But that termination should not contravene the

due process requirements as stipulated by the Nigerian banking and Banks and other

Financial Institutions Act. A lack of adherence to proper procedure can make the bank be

liable to wrongful termination. Customers are also entitled to the discretion of

withdrawing their funds and closing their accounts at all times as long as they abide by
23
Ojukwu-Ogba, N. E. (2009). Banking sector reforms in Nigeria: Legal implications for banker-customer
relationship. Commonwealth Law Bulletin, 35(4), 675–686.
24
Ogunleye, B., et al. (2024). Comparison of topic modelling approaches in banking context. arXiv.
25
Ojo, M. (2021). Consumer protection in Nigerian banking law: Challenges and prospects. Journal of
Banking Regulation.
 the stipulations of the bank. Central Bank of Nigeria being a Central Bank provides the

Central Bank of Nigeria Act that stipulates that banks should keep a proper account of

closing an account. Firing can also occur when bank experiences consolidation,

acquisition or reorganization of customer accounts. Where the regulatory and banking

license are revoked by the law, customer relations are automatically severed. The

Constitution of the Federal Republic of Nigeria 1999 (amended) avoids the wrongful

deprivation of property to customers as a result of termination processes. Devoid of

conclusion, it is always imperative that termination is done in a legal, transparent, and in

any regulatory and contractual requirements.

4.6 The Rule in Foley v Hill.

Foley v Hill (1848) is a case rule, which forms the basis of the law of banking

concerning the legal nature of the banker-customer relationship as a debtor/creditor

relationship26. Based on this rule, the money is the property of the bank when it is

deposited by one of the customers and the bank becomes a debtor who is obligated to

give the money back in form of the equivalent amount. The principle has been

extensively adopted and been used in the banking law in Nigeria and is the foundation of

the contemporary banking relationships27. The rule is in line with the provisions of the

Banks and Other Financial Institutions Act which acknowledges deposit-taking

institutions to be under debt to their customers. It is also consistent with the regulation

system of the Central Bank of Nigeria Act, control over the banking account of

customers.

26
Afolabi, L. O. (2021). The legal nature of banker-customer relationship in Nigeria. Journal of Commercial
Law, 15(2), 33–48.
27
Yusuf, E. E., & Bala, A. (2021). Empirical analysis of electronic banking satisfaction in Nigeria. arXiv.
 This principle is reinforced by the Constitution of the Federal Republic of Nigeria

1999 (as amended) in protecting property rights as customers can have their money back.

Nevertheless, the fact that customer money can be spent without limitation to the bank is

not the implication of the rule in Foley v Hill because they are still regulated and

gastrained by contractual requirements28. The rule has been criticised and particularly in

the contemporary banking setting where in addition to debtor-creditor, banks also bear

fiduciary and statutory suites of duty. In spite of these shortcomings, the rule still forms a

pillar of the banking law, still defining the fundamental legal relationship between the

banks and the consumers. To sum up, Foley v Hill rule is crucial to the interpretation of

the law of banking relationship and its application remains quite relevant as banking law

in Nigeria even now29.

This rule in the Foley v Hill case has continued to play a significant role in the

Nigerian banking jurisprudence since the legal ownership of deposited money is well

established. It lays the groundwork that, when money is deposited it no longer physically

belongs to the customer and now represents a debt of the bank. This principle enables

deposits to be lent by the banks through lending and investment activities, which is

fundamental in economic development. The rule is in line with the operation framework

of the Banks and Other Financial Institutions Act, which regulates deposit taking

institutions. Also, it is in line with regulatory control as was outlined in the Central Bank

of Nigeria Act and this guarantees that banks are stable financially as they continue to

operate on customer deposits. The present-day banking has however grown wider than

28
Ibrahim, M. A. (2023). E-banking and legal issues in Nigeria’s financial sector. Nigerian Journal of Legal
Studies, 18(1), 77–95.
29
Afolabi, L. O. (2021). The legal nature of banker-customer relationship in Nigeria. Journal of Commercial
Law, 15(2), 33–48.
the strict interpretation of the rule given by advancements in technology and financial

innovations. Banks now have other statutory and regulatory responsibilities which

surpass a basic debtor-creditor relationship in Foley v Hill. The Constitution of the

Federal Republic of Nigeria 1999 (as amended) further restricts the manner in which

banks could handle customer funds by safeguarding property rights. Nevertheless, the

rule is an important legal theoretical and pedagogical teaching in banking law education

and judicial logic. Finally, Foley v Hill still gives the fundamental basis of the legal

meaning of the nature of deposits in banking law, even in a contemporary Nigerian

banking practice.