Electronic Fund Transfers And Recovery In Nigeria: Reconciling Restitution, Unjust Enrichment And The Duties Of Banks

Contributor: Oby Umeh

Introduction

Electronic fund transfers have become an ordinary feature of commercial and personal life in Nigeria. Internet banking, mobile applications, USSD, automated payment channels and instant inter-bank payment systems can move funds from one account to another within seconds. That efficiency, however, creates a corresponding legal difficulty: an erroneous payment may be completed before the sender has any realistic opportunity to stop it.

The difficulty is not merely technological; it also involves private law and banking regulation. Where a person transfers money to the wrong beneficiary by mistake, the beneficiary does not ordinarily acquire a substantive entitlement to retain the money simply because the banking system successfully credited the account. The legal questions are therefore how the money may be recovered, against whom the claim should be brought, and what obligations arise for the sending and receiving banks once the mistake is reported.

The answer depends materially on the cause of the transfer. A payment may be erroneous because the sending bank failed to follow its customer’s instruction, because the customer supplied the wrong beneficiary details or amount, because a transaction was duplicated, or because the payer was induced by fraud to authorise a transfer. These situations engage different legal and regulatory consequences and should not be treated as identical.

The Central Bank of Nigeria (CBN) recognises these distinctions in its Regulation on Instant (Inter-Bank) Electronic Funds Transfer Services in Nigeria 2018, which provides different procedures for wrong transfers caused by bank error, fraud and customer error. The regulatory framework operates alongside the common-law principles of restitution and money had and received. This article examines how those principles interact with unjust enrichment, the banker-customer relationship, and financial institutions’ regulatory duties in recovering erroneous electronic transfers.^[1]

The Legal Character Of An Erroneous Electronic Transfer

An erroneous electronic transfer should first be distinguished from an unauthorised transaction. In an erroneous transfer, the account holder generally authorises the payment, but the transfer goes to the wrong beneficiary, involves the wrong amount, or is duplicated. In an unauthorised transaction, the account holder does not authorise the payment. Fraud-induced payments fall into a more difficult category because the customer may technically authorise the transaction but does so under deception.

The distinction matters because a bank’s legal responsibility depends substantially on the source of the error. Where a customer supplies an incorrect account number, and the bank executes the instruction accurately, the bank may have performed its mandate even though the customer has made a costly mistake. By contrast, where the customer supplies correct instructions but the bank credits another account, the bank may have failed to execute the customer’s mandate.

The CBN Regulation reflects this distinction. Regulation 10.2 addresses wrong transfers caused by bank error, Regulation 10.3 applies the CBN fraud-desk framework to wrong transfers involving fraud, and Regulation 10.4 governs transfer recall following customer error. A bank-caused error therefore directly engages the sending bank’s contractual and regulatory obligations. In contrast, a customer-caused error primarily raises a restitutionary claim against the unintended beneficiary, with the banks facilitating recovery. Fraud-induced transactions may also engage fraud reporting, temporary account restrictions, and criminal investigation.^[2]

Restitution And the Action for Money Had and Received

The common-law foundation for recovery is the principle that a person should not retain money which, in the circumstances, ought to be returned. Nigerian courts recognise the action for money had and received as a restitutionary mechanism for reversing an unjust benefit where the defendant has no proper basis for retaining the money.

In Standard Bank of Nigeria Ltd v Attorney-General of the Federation, the Lagos High Court considered money paid under a mistake of fact and held that where an agent still has the money in hand, it may be recovered from the agent; where the agent has already paid it over to the principal, the claimant’s remedy lies against the principal. The decision illustrates an important feature of mistaken-payment claims: liability turns not only on the original receipt but also on the legal and factual position of the person who continues to hold the money.^[3]

The Court of Appeal adopted the same restitutionary logic in Chartered Bank Ltd v First African Trust Bank Ltd & Ors. The Court explained that negligence is not a necessary ingredient of an action for money had and received; the central question is whether the defendant has received money belonging in substance to the claimant and would be unjustly enriched by retaining it. In electronic-transfer disputes, a claimant therefore need not establish fraud or negligence by the unintended beneficiary before a restitutionary claim can arise.^[4]

The Supreme Court also affirmed the equitable character of the action in FBN Plc v Ozokwere, describing money had and received as a remedy directed at preventing a defendant from retaining money which, in conscience, ought not to be kept. The cause of action can therefore operate independently of the contractual relationship between the sender and the sender’s bank.^[5]

This makes the remedy particularly suitable for electronic payments. Its concern is not the physical form in which money moved, but whether the recipient obtained a benefit that lacks a sufficient legal basis and should, subject to any available defence, be restored to the person at whose expense it was received.

Unjust Enrichment As The Normative Basis For Recovery

Restitution and unjust enrichment should not be treated as interchangeable expressions. In Nigerian decisions, unjust enrichment generally supplies the rationale for intervention, while money had and received provides a recognised restitutionary cause of action through which recovery may be ordered.

In practical terms, an erroneous-transfer claim requires attention to whether the defendant received an enrichment, whether the benefit was obtained at the claimant’s expense, whether the mistake or other circumstances remove any legal basis for retention, and whether a recognised defence defeats or reduces recovery. These considerations should guide the analysis without turning unjust enrichment into an undefined free-standing claim detached from established restitutionary remedies.

Payment by mistake is a clear example of a benefit that may lack a proper legal basis. The unintended beneficiary did not bargain for the money, provide consideration for it or acquire an independent entitlement merely because the banking system credited the account.

Recovery is not necessarily automatic in every case. Common-law restitution recognises defences such as change of position, which may arise where a recipient, acting in good faith and before notice of the mistake, materially changes position in reliance on the receipt in circumstances that make full restitution inequitable. Whether and how such a defence applies will depend on the particular facts and the extent to which Nigerian courts adopt it in the electronic-payment context.^[6]

The law must therefore strike a balance. It should prevent recipients from deliberately retaining funds they know they are not entitled to, while avoiding a system in which an unverified allegation of error automatically and indefinitely deprives an account holder of access to funds without procedural safeguards.

The Banker-Customer Relationship And The Duties Of Banks

The relationship between a bank and its customer is primarily contractual. In relation to a credit balance, the bank ordinarily assumes the position of debtor and the customer the position of creditor, with the customer holding a contractual right to demand payment subject to the terms governing the account.^[7]

That contractual relationship imposes duties on the bank. In United Bank for Africa Plc v Yaro Bakiyawa Yahuza, the Court of Appeal stated that a bank must exercise reasonable care and skill in carrying out the banking functions falling within its contract with the customer, including interpreting, ascertaining and acting in accordance with the customer’s instructions. The Supreme Court similarly emphasised in ^[8]Union Bank of Nigeria Plc v Chimaeze the high standard of care expected of a bank in managing a customer’s money.^[9]

Accordingly, where a customer instructs a bank to transfer a stated sum to Account A but the bank transfers the money to Account B, the dispute is not merely restitutionary. The customer may also have a contractual claim against the sending bank for failing to execute the mandate correctly.

The position differs where the customer personally enters the wrong account details, and the bank accurately processes the instruction received. In that situation, the bank’s primary obligation is to execute the customer’s mandate correctly, not to guarantee the customer’s choice of beneficiary. Recovery then depends principally on the applicable CBN recall procedure and the sender’s restitutionary rights against the unintended recipient.

This distinction prevents two opposite errors. Banks should not become insurers against every customer mistake. Still, they should not rely on the electronic origin of an instruction as a complete defence where their own systems or personnel failed to execute that instruction accurately. Customers also bear practical responsibilities: inaccurate account details, ignored confirmation prompts, or delayed reporting may make recovery substantially more difficult.

The CBN Regulation On Instant Electronic Funds Transfers

The CBN Regulation on Instant (Inter-Bank) Electronic Funds Transfer Services in Nigeria 2018 is the most directly relevant regulatory instrument. It establishes a dispute-resolution framework for instant EFT transactions and expressly addresses wrong transfers caused by bank error, fraud and customer error.

Where a sending entity transfers value contrary to a customer’s instruction because of a wrong account number, wrong amount, duplication or similar bank error, Regulation 10.2.1 requires the receiving entity to reverse the transfer within one business day where the sending entity makes a written request within fourteen working days and the funds remain available. The Regulation treats the reversal request as carrying an automatic indemnity from the sending entity. Where the funds are unavailable, the receiving entity must notify its customer, and the Regulation provides further consequences if the customer fails to restore the funds. It also prohibits the receiving entity from applying the wrong credit to the customer’s indebtedness or treating it as the customer’s property.^[10]

Customer error is treated differently. Where the beneficiary is known, regulation 10.4.1 expects the sending entity to encourage an amicable settlement. Where the beneficiary is unknown or refuses to refund the money, regulation 10.4.2 requires the sending entity, upon receiving a tenable claim, to notify the receiving entity, which must place a lien on the amount and seek the beneficiary’s consent to a refund. If consent is refused, the internal auditors of the sending and receiving entities are to mediate within two weeks, and the lien should not extend beyond that period. Where the beneficiary has already used the money and refuses to replenish the account, regulation 10.4.4 permits further regulatory consequences, including BVN watch-listing and possible referral to law-enforcement agencies.^[11][12][13]

These provisions show that the regulatory framework does more than direct customers to litigation. It creates administrative mechanisms for reversal, preservation and mediation, while recognising that a disputed claim may ultimately require judicial determination.

Erroneous Transfers and The Court Order Requirement

A recurring practical misconception is that every erroneous electronic transfer requires a court order before a bank may take any step. The 2018 EFT Regulation does not support that proposition. For bank error, regulation 10.2 establishes a direct inter-bank reversal process. For customer error, regulation 10.4 provides a recall process that may include a temporary lien and internal mediation.^[14][15]

That does not mean that banks may conclusively determine ownership merely because a complaint has been lodged. Where the beneficiary disputes the claim, the funds have been dissipated, the regulatory period has expired, or the claimant seeks a binding order compelling repayment, judicial intervention may become necessary. A regulatory mechanism that temporarily preserves funds is different from a final adjudication of entitlement.

The sounder position is therefore neither that courts are always required nor that they are unnecessary. Regulatory procedures should operate as the first-line mechanism where the CBN framework applies, while litigation remains available where administrative recovery fails, disputed rights require determination, or a longer preservation order is needed.

This distinction is important to the efficiency of electronic banking. A payment system that transfers money within seconds should permit proportionate regulatory action to preserve recoverable funds. Still, speed must not displace the procedural safeguards required when a customer’s proprietary and contractual rights are contested.

Account Restrictions, Liens and The Recipient’s Right To Property

An account restriction raises constitutional and contractual questions distinct from the underlying restitutionary claim. Section 44 of the Constitution protects property rights, and Nigerian appellate decisions have repeatedly examined whether banks and investigative agencies may restrict access to bank accounts without prior judicial authorisation. The legal basis, purpose and duration of the restriction are therefore critical.^[16]

In Ipinloju Damola Femi v EFCC & 3 Ors, the Court of Appeal recognised the statutory basis for a short stop order in circumstances of suspected unlawful activity. The Money Laundering (Prevention and Prohibition) Act 2022 permits the Nigerian Financial Intelligence Unit or the Economic and Financial Crimes Commission, or their authorised representatives, to place a stop order for up to seventy-two hours, after which continued blocking requires the judicial process contemplated by the Act. That statutory exception should not be treated as a general licence for indefinite account restrictions.^[17]

The Court of Appeal took a different but related route in Kuda Microfinance Bank Ltd v Amarachi Kenneth Blessing. The Court upheld the restriction in that case, relying on the applicable CBN fraud framework and the contractual terms governing the customer’s account. The significance of the decision is not that a bank has an unlimited power to freeze accounts, but that regulatory authority and binding contractual terms may, in an appropriate fraud or suspicious-activity context, support a temporary restriction without a prior court order.^[18]

The later decision in FBN Plc & Anor v DKN Investment Ltd & Anor emphasised the opposite side of the boundary. The Court of Appeal held that a bank could not rely on a law-enforcement directive, or on a court order that merely authorised access to account records, as authority to freeze a customer’s account where no valid court order expressly permitted the restriction.^[19]

Taken together, these decisions make the current position context-sensitive rather than categorical. A bank should identify the precise legal source of its power, distinguish a regulatory lien from a law-enforcement freeze, comply with any statutory time limit, and avoid treating a preservative restriction as a final determination that the disputed funds belong to the complainant.

Proof And Electronic Evidence In Recovery Of Erroneous Transfers

The electronic character of a transfer does not remove the claimant’s evidential burden. A person seeking recovery should establish the transfer, the amount, the intended beneficiary, the actual beneficiary and the facts showing why the payment was erroneous.

Bank statements, transaction receipts, electronic notifications, account records and transaction logs may therefore be central evidence. Section 47(4) of the Central Bank of Nigeria Act 2007 provides that a physical or electronic record of transactions in a format approved by the CBN constitutes sufficient proof of those transactions, and the CBN has issued an approved format for evidence of electronic transactions.^[20]

Where electronically generated documents are tendered in judicial proceedings, section 84 of the Evidence Act 2011, as amended, remains relevant to admissibility and authentication. Parties should therefore preserve the underlying electronic records and ensure they satisfy the statutory requirements governing computer-generated evidence.^[21]

Proof is particularly important because a bare assertion of mistake should not automatically justify restricting another person’s account. The claimant must establish a credible factual basis for the alleged error, especially where the recipient contends that the transfer arose from a genuine commercial transaction. Restitution cannot unwind an otherwise valid payment merely because the payer later regrets or disputes the transaction.

Emerging Issues In Electronic Transfer Recovery

Recent appellate decisions demonstrate that the law governing account restrictions is still developing. The differing factual and legal foundations of Kuda Microfinance Bank Ltd v Amarachi Kenneth Blessing and FBN Plc & Anor v DKN Investment Ltd & Anor show why a single statement that banks either always require, or never require, a court order is unsatisfactory. The answer depends on the source of the restriction, the regulatory instrument relied upon, the bank-customer contract, the involvement of law-enforcement agencies and the duration of the restraint.^[22]

A second issue is the increasing complexity of the payment chain. Modern transactions may involve a deposit money bank, a switch, a payment service provider, a microfinance bank, a payment service bank and a digital wallet provider. Recovery rules designed around a simple two-bank transfer may therefore become difficult to apply where funds move rapidly across several platforms.

A third issue concerns onward transfers. Where an unintended beneficiary receives money and transfers it to another account before notice of the mistake, the dispute raises questions of tracing and the potential liability of subsequent recipients. Nigerian restitutionary law will increasingly have to address those questions as electronic funds become easier to move across multiple institutions in short periods.

Contractual terms also require scrutiny. Digital banks and other payment providers increasingly reserve the power to restrict accounts where suspicious inflows, fraud complaints, or regulatory concerns arise. Such terms may be relevant, but they cannot operate independently of applicable legislation, CBN regulation, constitutional safeguards and the circumstances in which the restriction is imposed.

Recommendations And Reform Proposals

A more coherent framework would reduce uncertainty for customers, banks and payment service providers.

First, the CBN should consolidate the rules governing erroneous, unauthorised and fraud-induced electronic transfers across deposit money banks, microfinance banks, payment service banks, fintech platforms and other regulated payment service providers. A consolidated instrument should clearly distinguish customer error, bank error, fraud reporting, temporary preservation measures and final recovery.

Secondly, the payments ecosystem would benefit from a uniform digital recall mechanism through which sending and receiving institutions can record recall requests, preserve disputed sums where legally permitted, obtain or record beneficiary consent, document mediation and track escalation. A standardised process would improve both speed and auditability.

Thirdly, the CBN should clarify the interaction between the 2018 EFT Regulation, the Industry Fraud Desks Circular, the Money Laundering (Prevention and Prohibition) Act 2022 and contractual account-restriction clauses. The current jurisprudence shows that uncertainty about the source and scope of restriction powers creates avoidable litigation.

Fourthly, consumer compensation mechanisms should be strengthened for losses attributable to a financial institution’s error or service failure. The CBN Consumer Protection Framework already requires financial institutions to maintain compensation policies covering, among other matters, unauthorised or erroneous debits and financial loss caused by staff negligence or fraud.^[23]

Finally, courts and financial institutions should preserve the distinction between a substantive restitutionary claim and a procedural mechanism for preserving disputed funds. A lien or temporary restriction should not be treated as a declaration of ownership, and an account holder should retain access to judicial review where a restriction lacks lawful authority or continues beyond the period permitted by law.

Conclusion

Erroneous electronic transfers expose a tension at the heart of modern banking law. Payment systems are designed for speed and finality, while restitutionary law exists to reverse transfers that lack a sufficient legal basis. Neither objective can operate effectively without regard to the other.

Nigerian law already contains the principal elements of a coherent response. The common law provides restitutionary recovery through money had and received; unjust enrichment explains why a recipient should not retain a benefit without legal justification; the banker-customer relationship allocates contractual duties; and the FCBN’s EFT framework supplies administrative mechanisms for bank error, customer error and fraud.

The difficulty lies in integrating those rules with the law governing account restrictions. Recent appellate decisions show that a restriction’s legality depends on its legal source, contractual foundation, purpose, and duration. A temporary preservative measure must therefore be distinguished from a final determination of entitlement to the funds.

The preferable framework is one in which recovery begins with prompt regulatory intervention where the CBN rules apply, proceeds through restitution where the recipient has no legal entitlement to the money, and resorts to judicial determination where the parties cannot resolve the dispute administratively or where continuing restraint requires court supervision. Such an approach protects the integrity of rapid payment systems without sacrificing the contractual and proprietary rights of bank customers.

Reference:

1. Central Bank of Nigeria, Regulation on Instant (Inter-Bank) Electronic Funds Transfer Services in Nigeria (2018) regs 10.2-10.4. ↑
2. Ibid regs 10.2-10.4. ↑
3. Standard Bank of Nigeria Ltd v Attorney-General of the Federation (1971) All NLR 388. ↑
4. Chartered Bank Ltd v First African Trust Bank Ltd & Ors (2005) 13 NWLR (Pt 943) 654. ↑
5. FBN Plc v Ozokwere (2014) 3 NWLR (Pt 1395) 439. ↑
6. Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 (HL). ↑
7. Purification Techniques (Nig) Ltd v Attorney-General of Lagos State (2004) 9 NWLR (Pt 879) 665. ↑
8. United Bank for Africa Plc v Yaro Bakiyawa Yahuza (2014) LPELR-23976(CA). ↑
9. Union Bank of Nigeria Plc v Chimaeze (2014) 9 NWLR (Pt 1411) 166; (2014) LPELR-22699(SC). ↑
10. Central Bank of Nigeria, Regulation on Instant (Inter-Bank) Electronic Funds Transfer Services in Nigeria (n 1) regs 10.2.1-10.2.4. ↑
11. Ibid reg 10.4.4. ↑
12. Ibid reg 10.4.3. ↑
13. Ibid reg 10.4.2. ↑
14. Ibid reg 10.4. ↑
15. Ibid reg 10.2. ↑
16. Constitution of the Federal Republic of Nigeria 1999 (as amended), s 44. ↑
17. Ipinloju Damola Femi v EFCC & 3 Ors (2024) LPELR-61914(CA); Money Laundering (Prevention and Prohibition) Act 2022, s 7(6)-(8). ↑
18. Kuda Microfinance Bank Ltd v Amarachi Kenneth Blessing (2024) LPELR-80643(CA); Central Bank of Nigeria, Circular on the Establishment of Industry Fraud Desks, BPS/DIR/GEN/CIR/02/004 (11 June 2015). ↑
19. FBN Plc & Anor v DKN Investment Ltd & Anor (2025) LPELR-80878(CA). ↑
20. Central Bank of Nigeria Act 2007, s 47(4); Notice of the Approval of the Format of Evidence for Electronic Transactions, SI No 25 of 2013. ↑
21. Evidence Act 2011 (as amended), s 84. ↑
22. Kuda Microfinance Bank Ltd v Amarachi Kenneth Blessing (n 18); FBN Plc & Anor v DKN Investment Ltd & Anor (n 19). ↑
23. Central Bank of Nigeria, Consumer Protection Framework for Banks and Other Financial Institutions Regulated by the CBN (2016) para 2.7.3. ↑