Introduction
The payments system plays a very crucial role in any economy, being the channel through which financial resources flow from one segment of the economy to the other. It, therefore, represents the major foundation of the modern market economy. Essentially, there are three pivotal roles for the payments system namely; the Monetary Policy role, the financial stability role and the overall economic role.
Given the important role that well functioning payment systems has on monetary policy, financial stability and overall economic activity, the Central Bank of Nigeria has put in place a set of national payment systems policy objectives as a broad guideline and framework for all payment systems initiatives. In setting out the objectives of the National Payment Systems (NPS), the goal is to ensure that the system is available without interruption, meet as far as possible all users' needs, and operate at minimum risk and reasonable cost.
During the course of the past ten years the Central Bank of Nigeria (CBN), in collaboration with the Bankers Committee, launched the first major initiative to modernize the payments system. The starting point was to automate the cheque clearing system and making it a veritable platform for development of electronic payment channels. Hitherto cheques processing and computations of the net settlement position of banks were done manually. The implementation of the new procedures and rules based on MICR technology revolutionized the cheque clearing system. Consequently, a Centralized Automated Clearing process was established in Lagos clearing zone, whereby with MICR Reader Sorters, necessary information on cheques are captured, built into clearing files and electronically transmitted to the clearing house, from where the net settlement position of participating banks are automatically computed and also electronically transmitted to the Central bank for final settlement. The clearing cycle was subsequently reduced from 5 days to 3 days for local instruments and from 9 days to six days in respect of up-country instruments.
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