Can the Central Bank of Nigeria be held liable for acts done in good faith?

Introduction:

One of the objectives for which the Central bank of Nigeria was established among other things, is to act as a banker and provide economic and financial advice to the Federal Government. To this end, the Central bank of Nigeria is an agency of the Federal Government and thus, form part of the public service of Federation of Nigeria. See: CBN v. Jacob Oladele Amao & 2 Ors (2010) 16 NWLR (Pt. 1219) 271. 

The laws regulating banker and customer relationship in the banking law and practice are unambiguous; in fact they are clear as crystal. By virtue of section 15 of the Banking Act, CAP 28 Laws of the Federation of Nigeria, 1990, the Central Bank is conferred with powers to regulate and control banking activities in Nigeria. See the cases of Union Bank of Nigeria v. Albert Ozigi (1994) 3 SCNJ pg. 42; (1994) 3 NWLR (Pt. 333) pg. 385 and U.B.N v. Sax (Nig.) (1994) 8 NWLR (Pt. 361) pg. 150. 

However, in the discharge of these duties their actions may sometimes be seen as actions taken in bad faith which might disrupt financial activities which is the essence of this article.

Role of Central Bank of Nigeria to Commercial Banks and Financial Institutions:

It is usually taken to keep banking business alive, and forestall overnight collapse of banking business in Nigeria as well as a gesture extended to commercial banks and financial institutions to ease the pains of their depositors in the event of their collapsing that the Central Bank of Nigeria is mandated to control and keep custody of money of commercial banks and financial institutions as entrenched in the Central Bank Act, 1991, which glaringly stated the bank’s statutory mandates as follows:

a.      Issuance of legal tender currency notes and coins in Nigeria,

b.      Maintenance of Nigeria’s external reserves to safeguard the international value of the legal tender currency,

c.      Promotion and Maintenance of Monetary stability and a good and efficient Financial System,

d.      Acting as Banker and Financial Adviser to the Federal Government.

e.      The Central Bank of Nigeria is also charged with the responsibility of supervising and regulating Banks and other Financial Institutions which aims at ensuring high standards of banking practice and sustaining financial stability.

See the case of Omoyeni v. CBN & Ors (2015) LPELR-25789-CA. 

Liability of Central Bank of Nigeria to funds of Commercial Bank or Financial Institutions in its custody?

The banking obligation of the Central Bank of Nigeria regarding any banking transactions with either a commercial bank or financial institutions whereby the commercial bank or financial institutions incurs a liability to a customer against the Central Bank of Nigeria in whose custody or control is the money liable to be attached may be seen actions taken in bad faith. See the case of Barclays Bank of Nigeria Ltd v. CBN (1976) LPELR-751SC.

Under such circumstances, the Central Bank of Nigeria might be seen as the proper party to the cause of action but in the long run and depending on the facts of the case, it may be the commercial bank or financial institution who may be liable and upon obtaining judgment against the commercial bank or financial institution, a garnishee proceeding may be taken out against the Central Bank of Nigeria in whose custody or control the money of the commercial bank or financial institution resides to discharge the judgment debt.

For instance, section 84 (1) (2) (3) of the Sheriffs and Civil Process Act, Cap 86 LFN 2004, provides thus:

“84 –

(1)    Where money liable to be attached by garnishee proceedings is in the custody or under the control of a public officer in his official capacity or in custodial legis, the order nisi shall not be made under provisions of the last proceeding Section unless consent to such attachment is first obtained from the appropriate officer in the case of money in the custody or control of a public officer or of the Court in the case of money in custodia legis, as the case may be.

(2)    In such cases the order of notice must be served on such public officer or on the registrar of the Court, as the case may be.

(3)    In this section, appropriate officer means-

(a)     in relation to money which is in the custody of a public officer who holds a public office in the public service of the federation, the Attorney-General of the Federation;

(b)    In relation to money which is in the custody of a public officer who held a public office in the public service of the State, the Attorney-General of the State”.

A successful litigant who has got judgment in his favour and believes that money liable to be attached is in the custody or control of the Central Bank of Nigeria (among other banks) and thus initiated proceedings at the High Court to garnishee that money which under Section 84 of the Sheriff and Civil Process Act is in the custody or control of Central Bank of Nigeria have the right to do so.

Can the Central Bank of Nigeria be held liable for acts done in good faith?

It is instructive to note that Section 53 (1) of Banks and other Financial Institutions (BOFIA) 2004 Act, which provides thus:

“Neither the Federal Government nor the Bank nor any officer of that Government or Bank, shall be subject to any action, claim or demand by or liability to any person in respect of anything done or omitted to be done in good faith in pursuance or in execution of, or in connection with the execution or intended execution of any power conferred upon that Government, the Bank or such officer, by this Act.”

A calm look at the above reveals that once an act is done in good faith, such cannot be subject of litigation. From the above, it is clear that the condition precedent to the assumption of jurisdiction by a trial Court in a matter where a party is instituting a case against the Central Bank of Nigeria, is that the party must positively show bad faith on the part of the CBN. The bad faith is not an issue for trial, but must be visible on the face of the party’s claim. See the case of CBN v. Judgment Bureau De Change Ltd (2017) LPELR-43274(CA), CBN v Industrial Bank Limited (Merchant Bankers) (1997) 9 NWLR (Pt.522) 712 at 722 para A-B.

Also, Section 52(1) of the Central Bank of Nigeria Act aims to provide protection to the Central Bank of Nigeria and the Federal Government of Nigeria against adverse claims in respect of any decision the Bank, or the Federal Government, or the both take or failed to take in connection with the duties and functions conferred by the Act. See the case of CBN v. Stallionaire (Nig.) Ltd (2021) 1 NWLR (Pt. 1758) 515 at 521.

However, it is not an absolute protection or bar from litigation because any action taken must be shown to be done in good faith. The provisions therefore require that the Bank exhibits good faith in all its decision such that where challenged in court, it has to establish it did not act in bad faith. The provision of the section is not to safeguard against recklessness in taking actions or omission to take actions that may hurt the public or a part of it that the Act aimed to serve and protect. If a litigant alleges particulars of bad faith in its statement of claim, it is sufficient enough to activate the jurisdiction of the trial court to adjudicate on its grievances. See the case of N.D.I.C. v. C.B.N. (2002) 7NWLR (Pt. 766) 272; S.B.N. Plc v. C.B.N. (2009) 6 NWLR (Pt. 1137) 237.

Conclusion:

It should be noted that Central Bank of Nigeria has discretionary power to withdraw its policy, and if that is withdrawn, nobody can sue it on the said policy. Such policy takes the form of bailout and it is not statutorily mandated so to do.

It will also be seen that funds in the coffers of the Central Bank of Nigeria are actually funds of commercial banks or financial institutions agencies of the government and the procedure for the commencement of garnishee proceedings are set out in section 83 of the Sheriffs and Civil Process Act which is that the judgment creditor, by an application made Exparte seeks the order of court to attach the judgment sum or part thereof remaining unpaid but which money or sum reside with the third party, the garnishee who is indebted to the judgment debtor, be garnisheed in satisfaction of the judgment debt or part thereof. The application made is usually supported by affidavit evidence and upon the Exparte application being granted and an order nisi is put in place and same is served on the 3rd party, that is, the garnishee who is then invited to appear on the return date to show cause why the garnishee order nisi shall not be made absolute. See the case of S.T.B Ltd v. Contract Possessions (Nig.) (2001) 6 NWLR (Pt. 708) 115.

The procedure outlined above, is subject to the consent of the appropriate officer being first sought and obtained where the money liable to be attached by garnishee proceedings is in the custody or under the control of the Central Bank of Nigeria in its official capacity, the garnishee order nisi cannot be made and if made without the consent of the relevant officer being sought and obtained, the order made is liable to be set aside as a nullity for want of jurisdiction. In CBN v. J. Nwanyanwu & Sons Nig. Ltd (2014) LPELR 277 45 the Court per Oseji, JCA held that:

“Section 84 of the Sheriffs and Civil Process Act is very clear and unambiguous with regard to the procedure to be followed in a garnishee proceedings where money to be attached is in the custody or under the control of a public officer in his official capacity or in custodia legis. Under the aforementioned Section consent of the Attorney General of the Federation is required before a Court can validly issue a garnishee order nisi against funds in the hands of a public officer.”

See further decisions in CBN v. Hydro Air PTY Ltd (2015) All FWLR (Pt. 765) 227; Government of Akwa Ibom State v. Powercom Nigeria Ltd (2005) 6 NWLR (Pt. 868) 202. Thus, obtaining the fiat of the Attorney-General is a condition precedent to the commencement of garnishee proceedings against a public officer without which the exercise of jurisdiction by the Court is ousted. See also the cases of CBN v. AMCON & ORS (2017) LPELR-42986(CA), BANK PHB v. CBN & ORS (2019) LPELR-47383(CA) NDIC v. CBN (2002)7 NWLR (pp.297, paras B-C, G-H.

For further information contact the author:

Kingsley Izimah, Esq.

[email protected]

+234 (0) 806-809-5282