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Central Bank of Nigeria Bans Cheque Payment Above N10 Million

Published on Saturday 12th December 2009

The Central Bank of Nigeria has banned cheque payment for any amount above N10 million, even as it explained the huge losses posted by banks in their nine months operating results.

In a circular to deposit money banks entitled 'Maximum Limit on Cheque Payment' and signed by the Acting Director, Banking Supervision the CBN stated, " As a further step at enhancing the efficiency of the payment system in the country, the Central Bank of Nigeria hereby sets a maximum limit on cheque payment at N10 million with effect from January 1st 2010.

"To this end, any payment value exceeding N10 million should be made through the e_payment mode such as the Central Bank Interbank Funds Transfer System (CIFTS i.e RTGS) and Nigeria Interbank Settlement System Electronic Funds Transfer (NEFT) from that date.

"The maximum limit serves as a risk reduction measure in the clearing and settlement arrangement in line with international best practice. To support this initiative, deposit money banks are implored to properly educate their customers on the implementation procedure."

On the huge losses posted by banks, the CBN in a press statement said, "All Nigerian banks have now reported their results according to these stringent standards for corporate governance, transparency and disclosure. As expected, the third quarter earnings announcements for a number of banks have included a level of provisions that have led to reported losses, reflecting the true position of the lending portfolios,.

This has been particularly evident in the nine banks assessed to be in a 'grave situation' following the outcome of the combined CBN /NDIC examination. There are two key reasons for the current reported losses:

"Following more detailed investigations, the new management of these banks found the situation in a number of the Affected Banks to be worse than had been originally thought."

A number of issues only came to light after the CBN had put in place new management teams who therefore had access to greater and more up to date information. As a result of these findings, the banks had to make provisions over and above the CBN's initial recommendations. Nigerian banks, like other banks in countries around the world have faced a very challenging operating environment this year.

"However, the CBN is confident that the worst is now behind us. The current management teams of the Affected Banks have made significant progress towards restoring stability in their operations and continue to work diligently to ensure that sustainable, long term solutions are implemented with a view to building a solid platform for future growth.

In parallel, the CBN remains steadfast in its commitment to the Affected Banks and will continue to see that the interests of both their depositors and creditors are safeguarded. As part of our mandate of preserving the integrity of the Nigerian banking system, the CBN will continue to support efforts towards restoring good governance, best practice, liquidity and capital in the Affected Banks. To this end, the Tier 2 capital injected in the banks in August and October to help bolster their capital positions will remain in place. Furthermore, the CBN will continue to stand by its inter_bank guarantee issued in July this year. The CBN maintains its commitment to support the banks in protecting depositors funds and meeting obligations to creditors. It will introduce additional liquidity as required to ensure that the banking system continues to function normally."

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