LAW OF BANKING

AND
NEGOTIABLE
INSTRUMENTS
(LPT 313)
Course Outline
COURSE OUTLINE

1. Nature, history and evolution of banking in Nigeria

2. Law regulating the establishment and operation of banks in Nigeria

3. Banker-Customer relationship

4. Nature and legal effect of bank accounts - Overdrafts, forgeries, conversion

5. Nature and legal effect of negotiable instruments

6. Security for Advances –

a) Nature of secured credits
b) Types of security
c) Mortgages and foreclosures

7. Regulation of Banks and Financial Institutions

• The Role of -
(a) Central Bank of Nigeria (CBN)
(b) Nigerian Deposit Insurance Corporation (NDIC)
Reading List

1. J Milnes Holden The Law and Practice of Banking (3rd ed) Vols 1 & 2 ELBS London.
2. OA Adeniji The Law and Practice of Banking in Nigeria (2nd ed) OAU Press, Ile-Ife.
3. Goldface-Irokalibe, I.J. Law of Banking in Nigeria (2nd ed)Malthouse Press, Lagos
4. Enyia, J.O. The Law of Banking in Nigeria: Cases and Commentary Malthouse Press,
Lagos.
Nature of Banking
History and Evolution
of
Banking in Nigeria
History…
• Barclays Bank v Abubakar (1977)10 SC 13 @74

• Early Regulation
• The Banking Ordinance 1952
• The Banking Ordinance 1958
• The Banking (Amendment) Act No. 28 of 1961
• Banking Act 1969
• Central Bank of Nigeria Act 1991
• Banks and Other Financial Institutions Act (BOFIA) 1990
• See Omidire, K ‘Options for Banks’ Additional Capitalisation: Legal
Implications’ (1997) Vol. 2, No.2, MODUS International Law and
Business Quarterly p.10
 Law Regulating the
Establishment and Operation of
Banks in Nigeria
 Law Regulating the
Establishment and Operation of
Banks in Nigeria
Establishment and Operations
• Banks and Other Financial Institutions Act (BOFIA) No. 5 of 2020
• Explanatory Memorandum -
“This Act, among other things, regulates banking and business of ither financial institutions by prohibiting
the carrying on of such business in Nigeria without a licence and by a company incorporated in Nigeria.

This Act also makes adequate provisions regarding the proper regulation and supervision of such
institutions by the Central Bank of Nigeria.”
• The Act is divided into 5 Chapters –
A. Banks
B. Specialised Banks and Other Financial Institutions
C. General Regulatory Powers
D. Resolution Fund
E. Special Tribunal for the Enforcement and Recovery of Eligible Loans

• See Omidire, K ‘Regulation of Investment in Banking Business and Operations in

Nigeria’ in Current Developments in Nigerian Commercial Law (edited by I. E. Sagay
and O. Oliyide) 1998, Throne of Grace Limited, Lagos p.36
Banker-Customer Relationship
Relationship…
• Akwule and Ors v Reginam (1963) All NLR 193
• Section 2 of the Bills of Exchange Act Cap B8, LFN 2004 (Bills of
Exchange Act 1917)
• ‘Banker’ includes a body of persons whether incorporated or not who
carry on the business of banking.
• Section 131 BOFIA 2020-
• “the business of receiving deposits on current account, savings account,
paying or collecting cheques, drawn by or paid in by customers;
provision of financial consultancy and advisory services relating to
corporate and investment matters, making or managing investments on
behalf of any person whether such businesses are conducted digitally,
virtually or electronically only or such other business as the Governor
may by order publish in the Gazette, as banking business”
Relationship…
• Ojikutu v Agbonmagbe Bank Ltd and Anor [1967-1975] 2 NBLR 187
• Ademiluyi v. A. C. B. Ltd. [1964] NCLR 10
• Festus Yusuf v Co-operative Bank Nig Ltd [1994] 7 NWLR (pt 359) 676
• Great Western Railway Co. v. London & Country Banking Co. Ltd (1900)
AllER 1004 (HL)
• Ladbroke v. Todd (1914) 30 TLR 433
• National Bank of Nigeria v Hotchand and Ors [1967-1975] 2 NBLR 65
• Osawaye v National Bank of Nigeria [1967-1975] 2 NBLR 426
• Principal / Agent - See Bank of West Africa v Balogun [1967-1975] 2
NBLR 265
• Bailor / Bailee – See Johnson v Sobaki [1967-1975] 2 NBLR 143
Relationship…
• Duties of Banker
• United Nigeria Insurance Co Ltd v Muslim Bank (West Africa) Ltd [1967-
1975] 2 NBLR 231 (SCN)
• Savory & Co v Lloyds Bank Ltd (1932) 2 KB 122 @ 144
• Duty of Confidentiality
• Tournier v National Provincial & Union Bank of England [1924] 1 KB 461
• Habib Nigeria Bank v Koya [1992] 7 NWLR (pt 251) 43
• Exceptions
• Onagoruwa v Inspector General of Police [1991] 5 NWLR (Pt 193) 593

• Williams v Bankole [1966] NCLR 371

3 Party Interference on
rd

Customers’ Accounts