CBN advocates one-day settlement cycle

By Collins Nweze
culled from: THE NATION NEWSPAPER
 

The Central Bank of Nigeria (CBN) is plnning a one-day settlement cycle for Point of Sale (PoS) transactions to facilitate cashless banking.

The settlement cycle of one-day, known in the industry as Tier One (T+1), is to be moderated by the Nigerian Inter-Bank Settlement Systems (NIBSS).

The NIBSS is owned by all licensed banks including the CBN and discount houses.The body handles key infrastructure needs for inter-bank payments to remove bottlenecks in funds transfer and settlement processes. The firm also operates the Nigeria Automated Clearing System (NACS) which facilitates the electronic clearing of cheques and other paper-based instrument, automated direct credits and automated direct debits. 

CBN Acting Director, Banking Payments System Department, Gaius Emokpae, said in a statement that adopting the Tier One model will encourage the implementation of electronic payments in the country, adding that the regulator has also designed a format for sending settlement reports to NIBSS aimed at giving speedy value to merchants on Tier One.

"In order to build and sustain public confidence in the electronic payment system, especially for the successful implementation of the Cash-lite Lagos projects, it is important for merchants to get value for PoS transactions on T+1," he said.

Emokpae advised merchants to comply with NIBSS format of sending their reports in the required formats to the apex bank even after the given timeline of October 1, this year. Merchants are, therefore, mandated to comply with the format, failing which the CBN shall sanction any errant party with a penalty of N50,000 for each day they fail to comply.

The apex bank said the directive is based on powers conferred on it in section 47 of the CBN Act No. 7 of 2007. The provision empowered CBN with the duty of facilitating the clearing of cheques, credit instruments for banks and for this purpose to organise in conjunction with other banks, clearing houses in such places as it may consider necessary. 

The rules apply to clearing and settlement in the Nigeria Bankers Clearing Houses, which practise cheque truncation system. However, where there is a conflict between the provisions of the cheque truncation guidelines and revised Nigeria bankers'clearing house rules, the former would prevail. 

The CBN director explained that e-clearing, otherwise known as cheque truncation involves stopping the physical movement of the cheque and replacing the physical instrument with the image of the instrument and the corresponding data contained in Magnetic Character Ink Character Reader (MICR) line. The cheque details are captured, typically by the bank presenting the cheque or its clearing agent and electronically presented in an agreed format to the clearing house for onward delivery to the paying bank for payment.