CHEQUE TRUNCATION IN NIGERIA

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As part of efforts aimed at revamping the National Payments System, the

Central Bank of Nigeria (CBN), in August, 2007, launched the Payments

System Vision2020 (PSV2020) initiative. This process commenced with the

unveiling of the PSV2020 Strategy document, which benchmarks the

Nigerian Payments System against global best practice. The CBN

conducted a gap analysis using the Bank for International Settlements

(BIS) Core Principles, and thus gained an overview of the Nigerian

Payments System. This was used to determine areas of improvement in

our desire to install a

 “Nationally Utilized and Internationally

recognized”

Payments System in Nigeria.

Following the survey, the Bank created 11 working groups with members

drawn from the CBN, Deposit Money Banks (DMBs), and other

stakeholders in the payments ecosystem. Bearing in mind the objectives of

the PSV2020 mandates, the eleven working groups were further

categorized into three groups, namely,

Infrastructure, Initiative, and

Special Interest,

working groups.

One of the working groups under Infrastructure, is Cheque & Automated

Clearing House (Cheque & ACH), charged with the following mandates:

To draft the Policy for the maximum limit on cheques;

To update the Nigerian Bankers Clearing House Rules;

To facilitate the introduction of cheque truncation/express clearing in

Nigeria’s Automated Clearing House infrastructure;

To monitor, and make recommendations to the Bank on the ACH

infrastructure, in line with global best practice.

We are happy to inform all stakeholders that, in addition to the review of

the Nigerian Bankers Clearing House Rules (NBCHR), the Nigerian

Uniform Bank Account Number (NUBAN) scheme, has also gone live.

To further improve the efficiency and timeliness of cheque clearing in

Nigeria, the CBN recently approved the Guidelines on Cheque Truncation

in Nigeria. The objectives of the Cheque Truncation Guidelines are to:

(i) provide for the regulation and management of cheque

truncation in Nigeria with a view to reducing cost and days of

clearing instruments;

(ii) articulate the rights and responsibilities of presenting and

paying banks in the Cheque Truncation System;

(iii) provide for minimum technical and operational standards for

cheque truncation; and

(iv) To facilitate the implementation of an effective and efficient

payments system in the Nigerian Banking Industry.

As part of our preparation for the introduction of the Cheque truncation

system, the CBN carried out a Systems Audit Certification/Test on all

Deposit Money Bank, to confirm their readiness for the commencement of

the scheme in Nigeria. Our finding is that conditions are appropriate for the

cheque truncation scheme to go-live in the Lagos area. The implementation

of the initiative will reduce the Cheque clearing cycle from T+2 to T+1, and

thus make it more attractive to users, as an alternative means of payments,

instead of transacting in cash. The approved Guideline for cheque

truncation was subsequently presented to key stakeholders on April 27,

2012.

In consideration of the above report, and other indices, the CBN is pleased

to inform all the banks and the general public that the commencement date

for cheque truncation in Nigeria shall be August 10, 2012. The Lagos

Clearing Area will serve as the pilot zone. We propose that as soon as

possible, the scheme will be extended to the other clearing zones across

the country.

It must however be borne in mind that as we commence the

implementation of cheque truncation scheme in Nigeria, the CBN is not

unmindful of the inherent risks associated with the process. To this end,

and in furtherance of the electronic payments initiatives, the Guideline has

clearly defined the roles, infractions, and sanctions for all the participants in

the scheme. Compliance shall be strictly monitored and defaulters duly

sanctioned.

Furthermore, all stakeholders are implored to make the necessary

arrangements, to ensure the successful implementation of the scheme. It is

important to state that following the implementation of this scheme, all

customers’ mandates, and other instructions requiring the sighting of

physical cheques before making payments decisions, will no longer apply

as the instruments are expected to be pre-confirmed by the issuers of such

instruments.

As the initial cost of cheque truncation to banks is likely to be significant,

the CBN would encourage multi-bank shared cheque processing

centers/facilities. This is likely to reduce the cost of the new scheme.

We request all stakeholders to be guided accordingly.

Signed

Ugochukwu A. Okoroafor

Director, Corporate Communications

Central Bank of Nigeria

 


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