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Financial Constraints In The Face Of Naira Redesignement: The Liabilities Of Banks To Their Customers By Sunday Adebayo Esq.

February 6, 2023

The last few days have witnessed unprecedented struggles, fracas, self-nakedness and confrontations in the Nigerian banks as citizens continue to battle with the effect of redesigning of some Nigerian currencies by the Central Bank of Nigeria (CBN) under the watch of Gov. Emefiele. While many have applauded the decision as laudable in view of the government's efforts to curb inflation and the hoarding of currency,  others are of the opinion that the policy is politically motivated and it is targeted at some individuals and politicians ahead of 2023 general elections without recourse to its adverse effect on the nation's economy particularly on average Nigerian traders. 

From whichever angle one looks at the policy which has now exposed average Nigerians to financial constraints resulting into open confrontations between bankers and customers, the undisputable fact remains the irrefutable and trite position of law with respect to bank-customer relationship. The relationship between banks, other financial institutions and their customer is one of fiduciary relationship by which banks are expected to honor and discharge the instructions given by their customers at any given time failure of which exposes the bank to breach of duty. 

The relationship between a customer and his bank was explained by the Supreme Court in the case of U.B.N. Plc. v. Chimaeze (2014) LPELR-22699(SC); (2014) 9 NWLR (Pt. 1411) 166 per Ariwoola, JSC at pages 40-41 that: the appellant (the bank) is a fiduciary to the respondent (the customer). It owes the respondent a duty to exercise a high standard of care in managing the respondents money. Therefore, for dishonoring his cheque when his account was in credit to accommodate the amount on the cheque, the appellant had breached the fiduciary relationship between them, to which the respondent was entitled to compensation by way of damages.

In even more instructive terms, the relationship has been described as that of debtor and creditor with the Bank being the debtor upon receiving deposits from the customer while the Customer becomes a creditor who can demand for his money at any given time. In this regard, the court in the case of S.T.B. Ltd. v. Anumnu (2007) Vol. 29 WRN 75 at 99 lines 5-25 (CA) posited that "The legal relationship between a bank and a customer based on contract is that of creditor and debtor, or principal and agent. The creditor/principal being the customer and debtor/agent being the bank. The contractual relationship imposes a duty of care on the bank, the breach of which will impose a liability for negligence.

In the light of the foregoing, it is apparent that where a customer operates an account with bank or other financial institutions, the bank is duty bound to honor the request of the customer at any point in time particularly with regards to withdrawal and collection of funds. 
This position of law was reiterated in DIAMOND BANK PLC. V. IMMARCHES NIG. LTD. 2021 LPELR-56101 CA, where it was held thus;
... Therefore, the bank is duty bound to pay it's customers' money on request as long as the customer has enough funds to cover the cheque or withdrawal slip. To do otherwise would be a breach of the Appellant's (the bank) duty to pay the Respondent (the customer) his money when requested."

Additionally, the duty of care owed by the banks to their customers equally extends to all electronic gadgets such as Automated Teller Machines (ATM) which are set up under care and control of the banks. Thus, where the customer makes attempt to withdraw (demand) monies through the use of the ATMs, the bank is duty bound to ensure availability of funds to the customer through the said machines and  any failure of the machine to dispense cash will equally expose the bank to liability. 

In the case of MR. MOSES G. JWAN v. ECOBANK NIGERIA PLC & ANOR (2020) LPELR-55243(CA), it was held that;
"the respondents as bankers to the appellant owed him a duty to exercise reasonable care, diligence and skill in carrying his instructions, which duty has been held to extend over a whole range of banking business including ATM transaction in issue. See also Diamond Bank Plc V. Partnership Inv. Com. Ltd. (2009) 12 SCNJ 322; (2009) 18 NWLR (Pt. 1172) 67 and Agbanelo v. U.B.N. Ltd. (2000) LPELR-234(SC); (2000) 7 NWLR (Pt. 666) 534.

The ATM card issued by a bank being akin to a cheque, which must be honored on request once there are enough funds in the customers account, and failure to do that will mean the banker is in breach of the duty of care owed to its customer.
No doubt it is one of banking innovations to use an ATM card by a customer to request for and withdraw cash from his bank account, and indeed a specialized banking service offered by the respondents. Therefore, the issuance of the ATM cards by the banks to its customers carries with it the duty to ensure that both the cards and the ATMs work as they are meant to and where there is the failure of these services to a customer, the banks are duty-bound to explain what happened. This is quite common since the ATMs and their operations are under the control and management at the banks.

Bearing the foregoing position of the law in mind, it is crystal clear that the ongoing struggle, fights, fracas and open confrontations between banks and their customers over unavailability of funds for withdrawal is a clear violation and breach of fiduciary duty owed by the banks to their customers and which entitles the customers to remedies under the law. Without mincing words, I make bold to say that irrespective of any policy by the CBN which has adverse effects on the banks, the liability of the banks to their under the law remains unwaivering and failure of the bank to make funds available to customers is a breach of duty to which the customers are entitled to sue and claim damages against the bank.

Interestingly, banks as well operates accounts with the central Bank of Nigeria which invariably makes the banks customers of the CBN. As such, the commercial banks can also institute an action against the CBN for breach of duty in the same manner an individual can commence legal action against the bank.

On a final note, it is not out of place to come up with fiscal policies as same is part of the fundamental objectives and directive principle of state policies.  That notwithstanding, it is equally imperative to ensure that the fiscal policies are implemented in ways that does not infringe on the contractual or statutory rights of the citizens. It is quite obvious that redesigning the naira in itself is not a problem but the way the old currency is being swapped has brought more harm than good to the citizenry as ATMs scarcely dispense cash to customers in the face of scarcity of the new notes. This scarcity it must be borne in mind may open a flood gate of litigation between customers, banks and other financial institutions the consequence of which may eventually sink our crippled economy.

Sunday Adebayo is a Nigerian legal practitioner and an Associate @Law Corridor