PROBLEMS PROSPECTS AND GROWTH OF THE NIGERIAN’S CHEQUEING SYSTEM
PROBLEMS PROSPECTS AND GROWTH OF THE NIGERIAN’S CHEQUEING SYSTEM
The question is does an average Nigerian really understand what cheque is? Does he for example, know that cheque are supposed to be mind tenders for monetary transaction.
How does he use the instrument? Again do banks, government officials and their agent actually encourage the use of cheque and operate system without necessary suspicion. Have there been any serious efforts to educate banks, customers and the workings of the system? We are going to discuss the causes of this problem.
For instance, in America and Britain, most ever transaction is done in cheque or credit card without bordering anybody with the liquid cash. Therefore, Nigerians should be thinking as civilized people, though they can on no way compare their standard of organization, management and their affairs and responsibility with those of industrially advanced nations.
The idea of paying for ever thing on liquid should be left to the past. Payment by chequeing system should be over handled with an aim of making it function more effectively.
However, the writer is optimistic that despite all odds and problems facing the Nigerian chequeing system itself has quite a lot of prospects. That is never works well in Nigeria maybe attributed to machination of the operator of the system. As soon as the Nigerian society learns to be honest on their dealings and conscious on their work, the chequeing system will begin to work effectively people had the feelings that no one can be trusted and this makes them not to confide on cheque. But when the chequeing system start to work effectively, people will begin to trust one another, business transaction will begin to flow smoothly, loss of liquid cash to arrived robbers will be minimized and the naira will look afresh.
The aim of the project work is to as much as possible, identify the problem seemingly facing the Nigerian chequeing system, the prospects or the growth of all the system, if any will equally be high liquated. Therefore suggestion and recommendation will be advanced as means of making the chequeing system work more effectively in Nigeria.
To achieve all thee a conscious efforts must be made by the operation of chequeing system, and should be geared to wards educating the Nigeria public on the importance of the system. In this direction the government has a part to ply. The Banks and other financial institutions should Toin hands to save the Nigerian chequeing system from total collapse. There are some solution for more effective use of cheques on Nigeria, which we are going to treat on the next coming pages in order that Nigeria chequeing will prove more effectively. And most of these solutions has to be firstly solid by banks. When we look more closely we may fund out that the process of clearing cheques in bank is always a long process thereby frustrating the customers who is in need of the money thereby discouraging the customers from putting their money in bank. They prefer lauding their moneys without any hassles.
1.2 DEFINITION OF TERMS
PROBLEMS: Problem of Nigeria chequeing system or rather ineffectiveness of cheques in Nigeria is problems that hinder the growth of Nigeria chequeing system.
PROSPECTS: Prospects of Nigeria chequeing system is the hope or the height the Nigeria chequeing tends to attain in the near futures.
1.3 PURPOSE OF THE STUDY
The purpose of this study is to identify the problems, prospects and growth of Nigeria chequeing system out finding will help us to determine on how to solve the problems customers encounter in clearing cheque and what could be done to solve the problems of chequeing system.
And them, to highlight on the prospects or the height they want to attain in the near future and then most of their achievement and the growth they have got so far.
1.4 SIGNIFICANCE OF THE STUDY
The researcher believes that this study will be of immense significance to both the readers customers to banks and government agencies in number of ways. By going through this study, the reader will know the problems posed in the country in terms of Nigerian chequeing system. The reader will understand some problem of lack of economic development following the consequence of not putting money in the bank due to delays in clearing cheques.
1.5 STATEMENT OF PROBLEM
This study is centered on the problem prospects and growth of Nigeria chequeing system. There are so many problems customer banks have in the use of cheque as a medium of exchange. Banks are dishonouring so many cheques. There are frauds in the usage of cheques. Thus a lot of questions are to be answered in this study. What are the conditions on which cheque could be dishonoured is the customer to the banks able to make use of cheques issued to him/her. Some people grant cheques knowing fully well that they don’t have any account in the said banks to cash the cheque or that they don’t have enough money in their account, so when people go to banks to present their cheque, it will be dishonoured.
We have heard details or records concerning forgeries in cheque and manipulation in cheque, which will be treated in the later payee. When we look in the prospect of cheque in Nigeria system, Banks are in a high prospect or hope in making Nigeria chequeing system run smoothly without any problem or to be able to detect fraud in a cheque that is to be cashed in the bank and so banks has high hope of making chequeing system in Nigeria run smoothly without any ineffectiveness so that people will be encouraged to put their money on bank to reduce risk.
1.6 LIMITATION OF THE STUDY
The researcher delimited herself to banks such as First Bank of Nigeria (FBN) and Inland Bank Nigeria Plc (IBN) and Guaranty Trust Banks Plc (GTB) some of other Nigerian Banks was also used in this study and they include:
a. African Continental Bank ltd
b. Diamond Bank Nigeria ltd
c. Fidelity Bank Plc
1. Adekanye, Femi .A. : The Element of Banking in
Nigeria A practical guide 1st Edition 1983 (Grapham Bu Limited Kingdom) page 250.
2. M.J. Henderson: Banking Operations D.P Publishing
3. Onuora (2005:8) U.S.A 1988 fed page 223-225.
4. Adekanye, F.A (1983:pg 250): The Element of Banking
in Nigeria. A practical guide 1st Edition. (Grapham Bu Limited kindom)
5. M.J. Henderson (1988:pg 223-225) The Banking
operations D.P published ltd U.S.A
2.1 DEFINITION OF CHEQUE
A cheque can be defined as “a bill of exchange drawn on a banker and payable on demand. It does snot need the bankers acceptance. At any time, one or after the date of the cheque, anyone can present it to the banker who must either pay the cheque or show cause why he should not pay it.
The problem is that everyone who present a cheque for payment wants present a cheque for payment wants the cheque to be paid and may not be prepared to accept any reason why the cheque must not be paid it normally becomes unacceptable to most presenters who would want the cheque to be paid not matter the consequences of the action.
2.2 CHARACTERISTICS OF A CHEQUE
A valid cheque could be known or identified with these features:
a. Must be an unconditional or der
b. Must be in writing
c. Must be addressed by one person to a bank.
d. Must be signed by the drawer
e. Must contain sum certain in money
SPECIMEN OF A CHEQUE
The Drawer is P.C Onuorah
The Drawer is ABC Bank Plc
Moore street Lagos
The Payee is Onuorah Ngozike
Account number is 004154
Cheque Number is EN/NA 1107
2.4 ADVANTAGES OF CHEQUE
1. Easier and more convenient for making payment of large sum of money
2. It is easily carried about and reduces the risk of the robbery.
3. If a cheque is stolen, it is payment can be stopped by the drawer
4. It reduces fraud associated with carrying cash.
5. A crossed cheque does not require additional paperwork to show evidence of payment as the cheque stub or counter foil serves as a receipt.
2.5 DISADVANTAGES OF CHEQUE
In as much as we have advantages using there are still some inconveniences in using cheque and they are:
1. A cheque is not a legal tender but only a legal document and so no one is compelled to accept cheque.
2. It’s use is limited only to current account holders.
3. It involves the creditor with additional expenses.
4. Dishonoured cheques bring about emotional and psychological discomfort to the creditor or payee.
5. A cheque is not always easily transferable.
2.6 PROBLEMS ASSOCIATED WITH THE USE OF CHEQUE
These are many problems associated with the use of cheque. They include:
Countermand of payment
Forgeries in cheques
Manipulation on the cheques clearing house
attitude of organization and government agents.
COUNTERMAND OF PAYMENT
Countermand of payment i.e. stopping payment of cheques is one of the problem that is often associated with the use of cheques. If banker’s contract to deal with the customer’s balance according to his instruction means that he must duly take note of any countermand of payment. Most bank officials agreed that their customers once a while issue post-dated cheques only to turn round and countermand payment before they are due for presentation and payment. The problem here is that countermand of payment disrupts business transaction involving cheques thereby making people or customers to bank lose more concentration on the use of cheque.
FORGERIES IN CHEQUE
The most losses being incurred by banks in Nigeria today is as the result of forgeries in cheque. There have been reported cases of syndicates forging cheque of certain banks and signature of wealthy customers of such banks thereby detruding the bank of huge sum of money.
A wealthy who is a customer to a certain bank might loose his cheques to some of the syndicate who may in turn go to these experts who can forge signature and forge the wealthy man’s signature in order to collect some certain sum of money from the man’s account in the bank thereby defrauding the bank of huge some of money.
ATTITUDE OF ORGANIZATION AND GOVERNMENT AGENTS.
The attitude of government, organizations, unions, institutions and establishment does not encourage the use of cheques in business transaction. Government establishments operations and many other institution seriously abhor the use of personal cheques as a means of bill of settlement. They rather favour cash payment. This attitude more than anything else heightens the problems in the use of cheques for transactions.
The parent, for example is not allowed to use a personal cheques to pay for their children’s school fees no matter the reputation of such a parent. If you go to market to buy something, in the course of payment you can not compel a layman who does snot know how to go about casing a cheque to accept the cheque, he would simply reject the cheque preferring a raw cash instead of cheque.
More ministers, co-operation, union department, stores etc still refuse to accept cheque in settlement of bill entered into with them. Even in some cases somebody you are owning may prefer to be given a raw cash instead of cheque even though the person might know how to go about cashing the cheque, he would rather think of all inconveniences. The cheque might cause him, he would demand for raw cash.
The reason given by most in defense of their attitude is that the rate at which cheques bounce in Nigeria inhibits their use and crooks and dishonest persons issue dud cheque in settlement of bill thereby causing a lot of inconveniences and great looses to the organization concerned.
There have been a reported case of a certain man who issued a cheque to his creditor in settlement of bill knowing fully that he has no account in the said bank. The creditor went to the bank to cash the cheque only to fund out that the cheque is not genuine he considered that a great loss as he did not recover his money again. Tomorrow, when you ask such man to take a cheque as a settlement of bill will eh agree to it of course, he will not even consider taking cheque, he will rather prefer a raw cash as a settlement of bill.
To check this cash payment basis is usually preferred to cheque in Nigeria today.
MANIPULATION IN THE CHEQUES CLEARING HOUSE
There have been recorded cases of manipulation in the cheque by syndicate of criminals. If letter bearing inquiries about a fraudulent cheque is removed from record on clearing house and in some cases a forged positive reply is presented by the syndication at a session of the clearing house.
Another problem is clearing house that affected the cheque is delay in clearing house that affected the cheque in bank within the same city many take more than a week to clear, while inter state or up-country cheques sometimes take one month or more before the state of such cheque is known. In these circumstances, The payment in once state by cheque get loss on transit causing problem and delaying of the effective use of funds received.
All these four component comprises the problem associated with the use of cheque in Nigeria and if not critically checked and corrected, these problems of cheque will always remain and thereby making the use of cheque in Nigeria today not to be more effective or run smoothly without any inconvenience.
2.7 TYPES OF CHEQUES
We have two types of cheques that is being issued in Nigeria today and they are:
1. Open Cheques
2. Crossed Cheques
OPEN CHEQUES: An open cheque is that cheque which can be cashed over the counter. The cheque holder does not require to pay it into an account but cashes it by presenting the instrument at the bank branch on which it is draw for encashment over the counter.
It has no lines drawn across it’s face, it can be cashed by an authorized person when the cheque is lost or stolen and the identify of the person who cashed it may not be known or traced.
SPECIMEN OF AN OPEN CHEQUE
A SPECIMEN OF OPEN CHEQUE (CROSSED)
2.8 CROSSED CHEQUE: A Cheque is said to be crossed when two parallel lines are drawn across its face. The main implication of crossest a cheque is that such account cannot be paid over the counter but must be paid into a bank account. Crossing a cheque confers extra security on it, in favour of both the drawer and the payee. Thus if a crossed chequed falls unto the hands of unauthorized person (is lost or stolen) he cannot cash the cheque as the cheque must be paid into the account of the payee. Be going through an account the bank is able to tracer the presenter of the cheque.
Crossed cheque cannot be issued to a person without bank account. If crossed cheque must be opened before it can be issued to an accepted by somebody without a bank account. To “open” a crossed cheque in order to cash it over the counter , the drawer simply writes “pay cash” in between the parallel lines and signs his signature. A payee cannot “open” a crossed cheque. A crossed cheque is preferred when lending payment (cheque) by post.
TYPE S OF CROSSING
GENERAL CROSSINGS: When the two parallel lines in a crossed cheque does not bear the name of the bank or bank branch, the crossing is said to be general. Such a crossing may bear the word “& Co”, “A/c payee only” is “Not Negotiable”. A general crossed cheque may not be paid into the payee’s account with any bank.
SPECIMEN OF A GENERAL CROSSING CHEQUE
Special crossings of a cheque involves writing in addition to general crossing the nake of a bank branch in between the parallel lines. This means additional precaution on the cheque. A special crossed cheque must be paid into an account in the name bank or in the named bank branch.
SPECIMEN OF SPECIAL CROSSED
TERMS USED IN CROSSING CHEQUES
“& Co”:-This term has no special meaning or implication when written on a crossed cheque.
“A/c Payee Only” :- The drawer of a cheque who adds “A/c payee only” is saying that he does want the cheque to be paid into an account other than that of the payee or account of the person named in the cheque this means that such a cheque may not be transferable.
“Not Negotiable”:- This means that the person possessing the cheque has no greater right to its value that the person from whom it is obtained in other words anybody holding the cheque must returns it back to the rightful owner if it is discovered that the cheque was stolen or lost.
Thus, if Adamu sends a cheque to Bodo which is stolen by chidi who then uses it in a perfectly valid transaction with Daniel has no legal right to the cheque because chidi was not the rightful owner. The cheque must be returned to Bode, the rightful owner. The advise is that people should not accept “Not Negotiable” cheques unless they are sure of the “bona fides” of the person concerned.
FORMS OF CHEQUE
There are many others forms of cheque or terms which are used in qualifying cheques. These include:
Post dated cheque
BEARER CHEQUE: – These is a cheque which an files anybody holding it to be come the right owner. This means that whoever present it for payment is entitle to the amount stated on it. Because of the risks associated with this types of cheque, it is rarely in use. Anybody can be the bearer of a cheque. A bearer cheque does not require endorsement before transfer because the name of the bearers does not matter.
SPECIMEN OF A BEARER CHEQUE
ORDER CHEQUE:- An order cheque requires the bank to pay only to the person named on it or his “order”. A bank cannot pay an order cheque to another person unless the named payee instructs it to do so through endorsement. Endorsement means that original payee instructs or direct the bank to pay money to another person.
STALE CHEQUE:- A cheque which stays in the hand or possession of a payee for more than six mouths is called a stale cheque. This does not mean that the payee (creditor) will loose his money.
He only has to go sack to the drawer (debtor) to issue him a new cheque. In recant times a stale cheque may be renewed by canceling the old date, writing a new one and endorsing the drawer is usual signature in the cancellation.
POST DATED CHEQUE:- This is a cheque which is written today and bears a future date. This means that the cheque will be due for payment on the future date written on it. A post dated cheque can not be honoured by bank until that date is reached. The date written on it is called due date and the payee cannot present it for payment until the due date.
Blank cheque:- A blank cheque is one which has no amount written on it as at the time of issue. In other words, it contains other particulars of a normal cheque only that the amount is not written. It requires the payee to fill in an amount before presenting it to the bank this type of cheque should be used with utmost faithfulness and trust it may be used by a traveling executive to proved money for the running of his business in his absence, A man traveling abroad may also use this to provide an unspecified amount of money for his family’s up keeps. In some cases the payee is given a ceiling above which he cannot withdraw.
SPECIMEN OF A BLANK CHEQUE
2.10 DISHONOUR OF CHEQUE:- A cheque, if when dishonoured can not be disclosed to the payee if there is no money on the account of the drawer or if the drawer has no account in the said bank. But rather he (Drawee) will write dishonoured on the cheque and shows the payee in order that he might take it to the drawer who may then cime back to the bank to know why.
But under the circumstances where a drawer discloses the reason for rejecting the cheque to the payee for example. A was given a cheque by B, A then went to the bank to cash the cheque, C who is the Drawer, dishonoured the cheque and may be after much persuasion by A to know the reason, C disclose this information that B who is the Drawer has no money on his account in the bank, A may then go back and start abusing B, B (drawer) has the right to sue the bank for breaches (negligence by the banker) and the bank will be compelled to pay the damages for breach of contract.
SPECIMEN OF A DISHONOURED CHEQUE
Dishonoured will be written boldly inside the two parallel lines to indicate that the drawee could not pay the payee the money for some reasons which will not be disclosed to the payed.
1. Corns .C. Marshell (1968: pg628). The practical
Operation and management of Bank 2nd Edition. (Bankers Publishing Company, Boston (U.S.A).
2. John Orji (1996:pg 36) Banking operation in Nigeria.
(TEROHI Publisher) Enugu.
3. Journal Central Bank of Nigeria (1983, vol 21 No.2)
Economic and financial Review.
3.1 RESEARCH DESIGN AND MYTHOLOGY
As this project is an explanatory one the survey research design was used in the data.
3.1 LOCATION OF STUDY
The personnel studied for the purpose of this research work were mainly staffs of Inland Bank of Nigeria PLC Onitsha, Anambra State, whom for the purpose of this study were concentrated on.
3.3 POPULATION FOR THE STUDY
The study was carried out at Inland Bank of Nigeria PLC Onitsha Anambra State in its department. This list of the department with some of its units are as indicated in this following table below.
Number of staffs
Clearing and forward
3.4 POPULATION SAMPLE
The three department at inland bank of Nigeria Plc were sampled using random sampling techniques.
3.5 INSTRUMENT FOR DATA COLLECTION
In the process of collection of data, the researcher made use of questionnaire interview schedule and personnel observation where necessary.
3.6 VALIDITY AND RELIABILITY OF THE INSTRUMENT
The questionnaires used for the purpose of this study was constructed in such a way that the information to be received will b related to the purpose of this research and secondly, for the fact that the researcher assured his respondents of maximum secrecy and confidentially with respect to information received from this has enhanced reliability of the instruments.
3.7 METHODS OF DATA COLLECTIONS
To facilitate easy access to the much needed information for a successful completion of this research wor, the researcher used both the secondary and primary sources of data collection.
The researcher collected the needed data for the purpose of statistical analysis of this research work and this primary data were collected through oral interview and the popular survey method. The questionnaires were designed to obtain original information. It is answer are standardized and can be easily subjected to statistical analysis.
The oral interview was directed to the owners and managers/supervisors to give as much information as possible through answering questions that needs detailed explanation and exchange of ideas relating to the effectiveness of management.
The secondary source were gotten from text books newspapers, business time, magazines, Journals and seminar papers) where related issues were discussed unpublished documents that provides information relating to the management styles in Inland Bank of Nigeria PLC Onitsha were utilized.
ORAL INTERVIEW METHOD
The researcher conducted oral interview with the members of the staff and management. The important of oral interview in a work like this cannot be over emphasized because it made the respondents to get to the real picture of the issue at hand, hence the researcher felt that it is most advantageous that the questionnaires especially where intimate and detailed information was needed. It was also discovered by the researcher the some members of the management who were finding it hand to release some important information on paper (questionnaires) felt free during oral interview, questions asked to the respondents were quite similar to those estimated in the questionnaire. The researcher prepared interview schedule which were variously designed for head of departments the senior and Junior workers.
The researcher designed three sets of questionnaire for investigation study one type of the questionnaire was designed to collect response from the head of departments others for Senior and Junior workers respectively.
These are the sources of importation already available. They are information gathered from books journals found in the library and information section of the local government.
The sources enabled the researcher to gather adequate information on the management that were hither to elusive.
USE OF LIBRARY
Intensive and extensive use of library both public and private was made.
3.8 DATA TREATMENT TECHNIQUE
For the fact that his research is a descriptive one the simple percentage method will be used for the treatment of the data.
The data obtained will be analyzed based on the total number of agreement or disagreement (number of unform response) of each sealed instrument, divided by the number of the responses and multiple by 100
To calculate the percentage response, the researcher will use the formular.
F x 100
Where f = stands for the frequency which is the number of uniform response. N = the population (total responses).
SUMMARY OF THE FUNDINGS
CHEQUE AS AN IMPORTANT BANK INSTRUMENT FOR DAY-TO-DAY SETTLEMENT OF TRANSACTION.
4.1 CHEQUE AS BILL OF EXCHAGE
Under the Bill of Exchange Act 1882 section 73: a cheque may be defined as a bill of exchange drawn on a banker payable on demand. The person making the cheque is called the drawer and the person to who it sis payable to is called the payee.
When cheques bear across its fact the words and “company” or any abbreviation thereof between two parallel transverse lines its is said to be paid crossed and specially. A generally caressed not negotiable cannot give a transfer a better title tan he himself has. The point should be well noted in transactions involving the use of cheques.
The use of cheques to facilitate commercial transaction has been as old as the history of banking industry. Undoubtedly, the use of the instrument of cheques has its own characteristics of abuses for example, a drawer may make payment to a payee for settlement of transaction knowing that on presentation to a banker it will be dishonoured. The act on presentation to a banker it will be dishonoured. The act of issuing such cheque may be deliberate for negligent or unintentional.
In any case, it has been estimated that over 90 percent of all business transaction are settled by cheque in America. Each year in excess of a billion individual cheques are written and processed through the banking system and the number is increasing daily as more and more people are coming to find the use of a chequeing account covenant as a medium of exchange for the purchase of goods and payment of bills. But in Nigeria, cheques are not readily acceptable to transact businesses or make purchase in view of people’s mistrust for cheque.
The reason being that there is no sanction in law if a cheque is bounced.
The only sanction in respect of insurance of dud cheque is what the law years call “deal letter” because nobody has been convicted under the law . the dishonoured cheque (offences) Act 1977 even if the law is enforced, the market women at “OSE” market for instance, who are illiterates and does not know how to go about clearing it or using it are not likely to accept cheques.
4.2 INCREASING USE OF CHEQUE
However, most ministries, establishments and co-operations throughout the federation now pay certain categories of their workers with cheques through bank. In Anambra State for instance, workers on grade level OB and above are compulsory paid through the banks. The various accounts department of ministries and establishments prepare monthly salary vouchers of workers banks. The workers can therefore draw their cheques on the bank for settlement of bills of any kind.
Equally, one of the consequences of the cash squeeze’s during the currency exchange period is the increasing use of cheque and drafts by banks customers who previously made little use of this important instrument of day-to-day settlement of transaction. During this period, savings customer found themselves in a most difficult position they could not normally avail themselves of the use of cheque for settlement of their transactions. They could thus neither pay in cheques not settle their bill by cheques.
4.3 CHEQUES CLEARING SYSTEM
Almost every state of this country has branches of two or more of different banks operating in it, and this makes it inheritable that a large proportion of cheques could be paid into banks other than those on which they are drawn. Then for payment to be obtained these cheques must be presented to the branches on which they are drawn.
4.4 THE CLEARING HOUSE
However the payees or the holders of bank cheques maintain account in the same bank branch on which the cheques are drawn. Collection becomes only an internal book entries exercise. But generally, because of the number of banks on operation in Nigeria, large proportion of cheques are presented in other banks consequently, the banks receiving the cheques on presentation must collect the proceeds from the drawer bank. Usually, the clearing house serves this purpose. The clearing house is “a convenient place where the representatives of several bank meet and exchange cheques received on deposit and settle the difference owned to one another”
Each clearinghouse committee comprises a chairman appointed by the central bank. Apart from the Lagos clearinghouse, there are other clearinghouse in Enugu, the state capital where the Central Bank of Nigeria has branch
4.5 THE CLEARING HOUSE OPERATIONS
The clearing operation in itself simple in principle using the co-operative and commerce bank (C.C.B) that has its headquarters in Enugu as an example. At the close of business in each branch, all cheques paid in by customers which are drawn on other banks are assembled 9by the branch’s clearing department. A copy of the machines list and the cheques are immediately sent to the co-operative and Commerce Bank Headquarters.
The clearing house sessions being at about 10 am daily on every working day and last for a few hours when the session begins the cheques are exchanged.
4.6 CLEARING OF A CHEQUE DRAWN ON ANOTHER CLEARING AREA
Suppose Hassan, living in Kano buys some goods from kayoed in Ibadan. Hassan is a wealthy businessman and known to be credit worthy. To avoid the risk of robbery, she does not carry cash around. He therefore, pays for the goods by issuing an order cheque to Kayode. The cheque is drawn on bank of the North ltd, Kano main branch while Kayode banks with savannah bank of Nigeria ltd, Ibadan. Kayoed deposits the cheque in his account at savannah bank Ibadan. Until the cheque is cleared, Kayode cannot draw it savannah Banks sends the cheque to the Kano Branch of the Bank on collection basis. On receipt of the cheque at the savannah Bank Kano it is re-corrected in the inwards collection Register and batch with cheques to be presented for clearing in the following day. If the cheque is not returned after four cleaning sessions, it is deemed to have been paid, in accordance with clearing house regulations. On the morning of the fifth day, the inwards collection Register at Savannah Bank Kano is marked off and a settlement letter prepared crediting savannah Bank Ibadan with the proceed of the cheque.
Had the cheque been returned unpaid Ibadan branch would have been debited with the value of the cheque. If it was sent on collection basis then no entries will be raised when cheques are dishonoured. Upon receipt of the credit advice Ibadan branch of savannah bank removes the uncleared effects “tag on the account of Kayode and allows him to draw the proceed of the cheque”
4.7 CLEARING A CHEQUE DRAWN ON NON CLEARING AREA.
Suileman, a pharmist living in Bauchi issues a cheque to pay for drugs purchased form Aipha pharmaceutical company ltd, Lagos Suileman banks with union bank while Aiphar Pharmaceutical Company Banks with Wema Bank ltd Lagos. The cheque is credited to Alpha’s account as an uncleared effect item which means that the proceeds cannot be withdrawn until the fate of the cheque is known. The cheque is sent to union Bank, Bauch, duect by post on collection basis. On receipt of the cheque union Bank ensures that the cheque is drawn in accordance with the mandate given by suileman, bear a genuine signature and that the account is in funds. Thereafter, the cheque is debited to the accounts of Suileman and a union Bank draft payable in Lagos is prepared and dispatched to wema Bank limited Lagos. Upon receipt of the draft, the uncleared effect tag is removed, so Alpha pharmaceutical company ltd can drawn the amount. The Union Bank through the Lagos clearing house system. There is something called special clearing. This is a situation where a customer is in urgent need of fund and want the proceeds of a cheque to be credited to his account on the same day or want to know the cheque fate on the same day, he can ask the bank to send for special clearing. If the cheque is checked and it is
in order the content of the cheque should be debited into the customer’s account immediately and send a bankers payment to the presenting bank.
4.8 PAYMENT OF CHEQUES
After cheques have passed through the clearing system and they get to the branch on which they are drawn, the next step is the payment of the cheques. The branch must ensures that the cheques are properly drawn and that the branch has authority to debit the customer’s account. The branch must make sure that the customer have not stopped payment of any of the cheques and that the accounts are on funds. The signature of the cheques must be critically examined to ensure that they are genuine and that the cheques are signed in accordance with the mandate given to the Bank.
For instance, if two of the signatures are required to be signed, the bank must ensure that this is complied with the cheque itself must be examined to ensure that it is properly endorsed and that is not post dated, stale or altered.
Dishonoured cheques must be returned within four working days and the reason for returning them must be written in full and boldly on the face of the cheque and must be the true reason, why cheques are being returned
1. Rollin .G. Thomas (1984) Our modern Banking and
monetary system 4th Edition Eaglewood cliffs (N.J.) prentice Hall.
2. Doyle E.P (1983): Practice of Banking Macdonald and
Evan ltd., Plymouth UK.
CONCLUSION AND RECOMMENDATION
The author wishes to conclude that the collection of data for this research project was not an easy exercise. Some bank officials refused to co-operate even when the author had taken time to explain to them for those who co-operated not all were patient till the end of answering my questions.
Worst still, not much job has been done on this subject matter previously so this meant a serious constraint to the author on data collection.
However the authors re-doubled efforts helped him to covert the necessary data used on this work. It is expected that more and more people in Nigeria will agree to use cheques in transactions as soon as the chequeing system begins to work effectively for the system to work effectively, a concerted effort must be made by banks, governments and individuals to check the activation of books and dishonest persons who manipulate the system once this is done, people will learn to trust settlement of transactions.
These should be conveniently carried and experience shown that stolen traveler’s cheques can easily be recovered if the purchaser takes a prompt action to lodge a report with the issuing bank, which will in turn issue caution circulars to other commercial bank stating details of the serial numbers and amounts of the traveler’s cheque.
1. Ade T. OJO and Adewunni Wole (19983): Banking and
Financing in Nigeria, fraud A ltd, Ibadan.
2. Adekanye Femi (1983): The elements of Banking in
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