CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The cheque clearing system is the means whereby bank exchange cheque drawn through clearing system. Clearing system on the other hand is the medium through which proceeds of cheques and other payment instrument are transferred from the paying bank to collecting bank.

The Nigerian automated clearing system (NACS) which book-off on October 21, 2002 as a result of the time function that affects clearing system i.e before cheque is cleared. It involved much stretch in which cheque is not cleared at when needed.

The Central bank of Nigeria (CBN) act No 24 of 1991 empowers the apex bank to facilitating the clearing of cheque and other payment instruments. As a movement forward on the execution of the mandate (CBN) issued the Nigeria banker’s clearing house rule on January 2, 1995. In November 1995 (CBN) governor announced a plan for a dratie overall of the clearing system monetary transaction in Nigeria were largely based on cash and as such had inherent problems, such as security volume of paper its transport, currency sorting changing.

This state of affair creates the moving member of the public to non – cash payment instruments was hampered by the clearing processes, which was largely manual, the services to the customer was prior and cheque based on transaction were use prone to fraud “the clearing circle look between 5 to 15 working days”.

The clearing process was very rowdy with too many banks participating on clearing. The process was frequently late in balancing the book and prone to human awor.

This made it very difficult for central bank of Nigeria (CBN) to calculate and advise on the net settlement figures on time after the days clearing. Although many of the instrument had magnetic character recognition (MICR) code them the lack of automated meant that MIC code lines and infrastructure would not be used.

This meant a waste of consideration investment made in the form of magnetic link character recognition (MIRC) code line information processing infrastructure to fund solution to the problems a committee was set-up its report formed the basis of the banker’s committee decision on June 16, 1996 which approved the automated of the clearing process to more zone within the country with Lagos having more zones” reduce the number of clearing days to buster consumer confidence and encourage. The uses of non cash instrument also reduce number of clearing bank to make the process number of clearing bank to make the process more manageable, faster it was reasoned that automated would make used of [MICR] technology possible, which would further bring speed and efficiency into clearing processing with the potential to reduce the clearing float that introduce networking between the parties involved in clearing these was expected in unlock the benefit of electronic banking for Nigerians.

1.2 STATEMENT OF THE PROBLEM

The problem of this study is to found out empirical analysis basically on applied research aimed at solving the immediate practical problems in the banking system.

1.3 OBJECTIVES OF THE STUDY

i. To access the significance of automated cheque clearing system.
ii. To make the process of cheque clearing faster and efficient.
iii. To cut the number of cheque clearing days, so that consumers will have the confidence and courage of the uses of non-instrument.
iv. To eliminate identity difficulties and encourage development and integration of other electronic payment and settlement product.

1.3 RESEARCH QUESTIONS

i. Is automated cheque clearing system significant?
ii. Can the process of cheque clearing be faster and efficient?
iii. How can the number of cheque clearing days be cut down?
iv. How can identity difficulty be eliminated to encourage development and integration of other electronic payment and settlement product.

1.4 RESEARCH HYPOTHESIS

Ho: Automated cheque clearing system is not significant.
Hi: Automated cheque clearing system is significant.

1.5 SIGNIFICANCE OF THE STUDY

This study has important value to the academic it helps the student of Banking and Finance, Business Administration, Marketing, and Economics in our various institutions to have knowledge about the automated clearing system as part of their course or study when they get to the field so that it would not be strangled to them.

Community:- It helps people in community especially those who enjoy banking services by providing quick and faster service for them for instance when a cross cheque is drawn to any bank, the customer of collecting bank enjoy quick and faster payment.

Society:- The introduction of (ACS) growth and economy development in which society are the beneficiary.

1.6 SCOPE OF THE STUDY

The study is on automation of cheque clearing system and selected banks were used as the case study for this research.

1.7 LIMITATION OF THE STUDY

To carry out this project is not an easy task due to circumstances that warrant it such as;
Time Factor: Time factor is the major factor that hindered the investigation to be carried out is due to the academic situation because daily academic period involved information to complete the project.

Financial Factor: Financial constraint which make it difficult to buy the material and collection of appropriate data for the project.

1.8 DEFINITION OF TERMS

Cheque Clearing System: Is the process of moving a cheque from the bank in which it was deposited to the bank on which it was drawn, and the movement of the money in the opposite direction.

Automation: is the use of various control systems for operating equipment such as machinery, processes in factories, boilers and heat treating ovens, switching on telephone networks, steering and stabilization of ships, aircraft and other applications with minimal or reduced human intervention.