Yes chewing on pencils is bad for your health.
Pencils contain lead for the writing part of it which can cause lead poisoning if you ingest enough of the pencil lead.
A lot of people chew on pencils when they are nervous or bored but it's a habit that you really should try to break because it can lead to health issues.
If your kid is chewing on pencils try to find something else for them to chew on that is much safer for them.
However a lot of people who chew on pencils eventually stop on their own and some do not get sick from it but some people do indeed get sick from the pencil chewing.
So It's not recommended to chew on pencils.
You're unlikely to get seriously sick but it's still a possibility when you chew on pencils.